IRS's $10 rise in the high-cost per diem goes entirely to lodging and incidentals

Take the increases back out and last year's high-low rates were $319 a day in a high-cost locality and $225 everywhere else in the continental US ^[1]. With the meals portion held where it was ^[3], the share left for lodging and incidentals rises from $233 to $243 in expensive cities. In the rest of the country it goes from $151 to $156 ^[2]. The headline increases are 3.1% and 2.2% ^[4]. Measured against the non-meal share alone, where every added dollar went, they are 4.3% and 3.3% ^[3].

Per affected travel day, the rate increase moves less money than the list does. Under the high-low method a trip is priced by whether its locality is on the high-cost list, and the notice redraws that list ^[6]. The gap between the two rates is now $99 a day, up from $94 ^[5]. A city that joins the list lifts a traveler's allowance by $99 a day, 9.9 times this year's rate increase ^[6]. A city that leaves cuts it by the same amount. The source report does not say which localities moved.

How much of this reaches a given company depends on how it substantiates travel. A company that documents actual expenses, which the IRS said remains allowed for taxpayers with adequate records ^[7], has nothing to reload on Oct. 1. Taxpayers can also use the General Services Administration's federal rates under Rev. Proc. 2019-48 ^[8], so the high-low numbers bind only those who picked that method. A company on high-low whose travelers go to cities that kept their status pays $10 or $5 more a day and edits two numbers in its expense system ^[1]. A company whose main destinations were reclassified faces a swing of $99 per traveler-day in either direction ^[5]. It is the one with real budget work to do before the new period starts on Oct. 1 ^[2].

Carriers sit outside most of this. Their special meals rate did not change ^[4], and eligibility turns on the IRS definition of a worker "whose work is of the type that directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and regularly requires travel away from home" ^[9]. The incidental-only deduction also stays at $5 a day ^[5]. That covers the porters' fees and hotel-staff tips that IRS Publication 463 counts as incidentals ^[10].

In my view the Oct. 1 update is small for most high-low employers, $10 on a $319 day ^[1]. The view fails for a company whose most-visited city has a federal rate near the $280 cut, because localities cross between the two lists at that line ^[6].