The Internal Revenue Service (IRS) sets per diem rates for different industries each year to provide a standard allowance for daily expenses incurred while on business travel.
For truckers who spend a significant portion of their time on the road and for moving purposes, understanding and properly navigating these rates is crucial for maximizing deductions and minimizing tax liabilities.
This applies to any business-related trips with corresponding business miles that concur with standard mileage rates or standard rates.
However, with new changes in the works for the years 2023 and 2024, it is important for truckers to stay informed and prepared.
In this article, we will delve into the details of the IRS per diem rates and how they specifically apply to truckers, with a focus on flat stays.
We will discuss what constitutes a flat stay, how per diem rates are determined, and the potential impact of the upcoming changes.
It is always better to understand the actual costs to avoid any additional costs since every cents per mile driven matters for each trucker to make an allowance plan and apply for tax-free reimbursements.
By the end, readers will have a thorough understanding of the per diem rates for truckers and be equipped with the knowledge and resources necessary to efficiently navigate them.
So, let's dive in and explore the world of per diem rates for truckers and stay ahead of the game for the years ahead.
The federal per diem rate for transportation companies will remain unchanged in the upcoming fiscal year. However, there will be an increase in the "high-low substantiation" per diem, although this deduction is not commonly utilized by truckers.
According to the IRS, the per diem rate is designed to cover the necessary business expenses incurred while traveling away from home. It consists of the M&IE rates, which include special transportation industry meals and incidental expenses, as well as a $5 per day rate for incidental expenses only. Additionally, the per diem rates for low-cost and high-cost areas are determined using the "high-low substantiation method," which accounts for lodging costs.
For travel within the continental U.S., the M&IE rate will remain at $69 per day, while for travel outside of the lower 48, it will be $74 per day. Remarkably, this will mark the third consecutive year that these rates have been in effect.
Many companies have the option to provide drivers with higher per diems, but it is widely accepted in the industry that the deductible IRS rate is the standard compensation method.
However, if a driver chooses not to seek reimbursement for meals, a fixed rate of $5 per day per diem is applied, and this remains unchanged.
The increase in rates specifically pertains to the high-low substantiation, which factors in lodging expenses. Truckers who utilize a sleeper berth do not qualify for this deduction since they do not incur lodging costs. The new rates are $214 for non-high-cost areas, up from $204, and $309 for high-cost areas, up from $297.
It is worth noting that the list of high-cost areas is extensive, although many of them are not year-round but rather for a limited duration, typically spanning two to three months. For instance, Virginia Beach is considered a high-cost area only between June 1 and August 31.
This year, the list of high-cost areas has witnessed the addition of several regions. These include Yosemite National Park in California, which remains on the list throughout the year. Additionally, Tampa/St. Petersburg in Florida, Atlanta, Missoula in Montana, Saratoga Springs/Schenectady in New York, Eugene/Florence in Oregon, and Montpelier in Vermont have also been designated as high-cost areas. However, apart from Yosemite, these other regions have limited periods during which they hold the high-cost designation.
During a presentation delivered to the National Accounting & Finance Council of the American Trucking Associations a few years ago, Troy Hogan, a director at advisory firm Katz, Sapper & Miller, provided valuable insights on how driver compensation could be augmented through the use of per diem. Hogan's presentation featured a comprehensive comparison between a driver receiving 52 cents per mile without any per diem and a driver receiving 41 cents per mile along with a per diem of 10.
Although the "no per diem" driver had a higher gross pay, the inclusion of per diem in the compensation package introduced various tax considerations that ultimately led to a net pay of $1,032. On the other hand, the driver without per diem received a higher base pay but did not benefit from any per diem, resulting in a net pay of $995.
As truckers prepare for future trips and stays, it is important to stay informed on the IRS per diem rates and how they may affect flat stays. While the rates may change from 2023 to 2024, staying on top of these changes and understanding how they impact your per diem allowance is crucial for staying compliant with tax laws and maximizing your earnings.
As always, it is recommended to consult with a tax professional for personalized guidance and to ensure you are following all necessary regulations. With proper knowledge and preparation, truckers can navigate the IRS per diem rate changes and continue to have successful and profitable trips.
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