IRS per diem rate going up by $3 next month

From Freight Waves.

For the first time in three years, the allowable driver per diem is going up.

The Internal Revenue Service said the per diem for transportation workers in the 2021-22 period will be rising to $69 for travel in the continental U.S. and up to $74 for travel outside the continental U.S. Both figures represent an increase of $3.

The new rate goes into effect Oct. 1, the start of the federal budget year. The earlier rate had been in effect since 2018-19.

While what the IRS permits as the per diem does not automatically convert into the per diem paid to drivers, it largely works out that way.

In an email to Freight Waves, Steve Pletcher and Kelli Block, partners at Scopelitis, Garvin, Light, Hanson & Feary, said that “in practice, many motor carriers effectively adopt the IRS meal and incidental expense rate as their per diem rate, which makes a certain amount of sense because that is the amount the IRS has effectively deemed it reasonable for certain transportation workers to incur in meal and incidental expenses while traveling away from home on business.”

The increase may seem small. But if it is taken for 200 days on the road by an independent owner-operator, that works out to $600 of tax-free compensation because the per diem is viewed by the IRS as expense reimbursement. That type of compensation is not taxable. Depending on a driver’s tax rate, $600 could be seen as equaling $900 to $1,000 of taxable compensation.

The Scopelitis attorneys said the $3 increase is the same size as the one that went into effect in the 2018-19 tax year. However, that increase came after just two years, as opposed to the three years for this increase.

Troy Hogan, a partner with the transportation advisory firm of Katz, Sapper & Miller, said the per diem rate is not just a factor for independent owner-operators. He said employee drivers who are paid a linehaul rate will usually get an expense fee per mile.

See the complete article online at Freight Waves.