IRS Publishes Special Per Diem Rates for 2021-2022

Superseded by Notice 2022-44

Modifies and Supersedes Notice 2020-71

SECTION 1. PURPOSE

This annual notice provides the 2021-2022 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home, specifically (1) the special transportation industry meal and incidental expenses (M&IE) rates, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method. This notice also modifies Notice 2020-71, 2020-40 I.R.B. 786, to change the portion of the year Sedona, Arizona is a high-cost locality under section 5 of Notice 2020-71.

SECTION 2. BACKGROUND

Rev. Proc. 2019-48, 2019-51 I.R.B. 1392 (or successor), provides rules for using a per diem rate to substantiate, under § 274(d) of the Internal Revenue Code and § 1.274-5 of the Income Tax Regulations, the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Taxpayers using the rates and list of high-cost localities provided in this notice must comply with Rev. Proc. 2019-48 (or successor). Notice 2020-71, as modified by this notice, provides the rates and list of high-cost localities for the period October 1, 2020, to September 30, 2021.

SECTION 3. SPECIAL M&IE RATES FOR TRANSPORTATION INDUSTRY

The special M&IE rates for taxpayers in the transportation industry are $69 for any locality of travel in the continental United States (CONUS) and $74 for any locality of travel outside the continental United States (OCONUS). See section 4.04 of Rev. Proc. 2019-48 (or successor).

SECTION 4. RATE FOR INCIDENTAL EXPENSES ONLY DEDUCTION

The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction is $5 per day. See section 4.05 of Rev. Proc. 2019-48 (or successor).

SECTION 5. HIGH-LOW SUBSTANTIATION METHOD

1. Annual high-low rates. For purposes of the high-low substantiation method, the per diem rates in lieu of the rates described in Notice 2020-71 (the per diem substantiation method) are $296 for travel to any high-cost locality and $202 for travel to any other locality within CONUS. The amount of the $296 high rate and $202 low rate that is treated as paid for meals for purposes of § 274(n) is $74 for travel to any high-cost locality and $64 for travel to any other locality within CONUS. See section 5.02 of Rev. Proc. 2019-48 (or successor). The per diem rates in lieu of the rates described in Notice 2020-71 (the meal and incidental expenses only substantiation method) are $74 for travel to any high-cost locality and $64 for travel to any other locality within CONUS.

2. High-cost localities. The following localities have a federal per diem rate of $249 or more, and are high-cost localities for the specified portion of the calendar year.

3. Changes in high-cost localities. The list of high-cost localities in this notice differs from the list of high-cost localities in section 5 of Notice 2020-71.

a. The following locality has been added to the list of high-cost localities: Hilton Head, South Carolina.

b. The following locality has changed the portion of the year in which it is a high-cost locality: Jamestown/Middletown/Newport, Rhode Island.

c. The following locality has been removed from the list of high-cost localities: Gulf Breeze, Florida.

SECTION 6. MODIFICATION TO NOTICE 2020-71

The specified period for which Sedona, Arizona is a high cost locality under section 5, paragraph 2 of Notice 2020-71 is modified to be October 1, 2020 - December 31, 2020; March 1, 2021 - April 30, 2021; and September 1, 2021 - September 30, 2021. This section 6 is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only, that are paid to any employee on or after October 1, 2020, for travel away from home on or after October 1, 2020.

SECTION 7. EFFECTIVE DATE

Except as provided in section 6 of this notice, this notice is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only, that are paid to any employee on or after October 1, 2021, for travel away from home on or after October 1, 2021. For purposes of computing the amount allowable as a deduction for travel away from home, this notice is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2021. See sections 4.06 and 5.04 of Rev. Proc. 2019-48 (or successor) for transition rules for the last 3 months of calendar year 2021.

SECTION 8. EFFECT ON OTHER DOCUMENTS

Notice 2020-71 is modified and superseded.

DRAFTING INFORMATION

The principal author of this notice is James Liechty of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice contact James Liechty at (202) 317-7005 (not a toll-free call).