The Internal Revenue Service published Notice 2026-60 on Thursday, September 24, 2026, setting the updated special per diem rates that business travelers can use to substantiate and deduct travel expenses away from home. The new rate structure raises daily lodging, meals, and incidental expense caps under the simplified high-low substantiation method across the continental United States.
According to the tax agency, the annual guidance outlines “the 2026-2027 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.”
How do the new per diem travel rates work?
Under the high-low substantiation method, the per diem rate for qualifying high-cost localities inside the continental United States increases to $329 per day, reflecting a $10 gain over the prior cycle. For all other domestic destinations within the continental United States, the standard allowance climbs by $5 to reach $230 per day. These daily totals cover combined expenses for lodging, daily meals, and incidental services during approved corporate travel.
The portion of the daily per diem designated as meal expenses under Section 274(n) of the Internal Revenue Code remains unchanged despite the increase in overall allowances. For high-cost localities, the meal portion stays frozen at $86 per day, while the meal portion for all other domestic localities remains at $74 per day. Furthermore, taxpayers utilizing the deduction exclusively for incidental expenses, such as tips and baggage handling, maintain a standard allowance of $5 per day for both domestic and international destinations.
Daily expense allowances across federal categories
- High-cost locality total per diem under the high-low method: $329 per day
- Standard locality total per diem under the high-low method: $230 per day
- Meal portion under Section 274(n) for high-cost areas: $86 per day
- Meal portion under Section 274(n) for standard domestic areas: $74 per day
- Transportation industry meal and incidental rate inside continental borders: $80 per day
- Transportation industry meal and incidental rate outside continental borders: $86 per day
- Incidental expenses only standard deduction: $5 per day
Municipal classifications and geographic changes
To qualify as a high-cost locality under Notice 2026-60, a destination must now reach an elevated federal per diem threshold of $280 per day, up from $272 in the previous cycle. This qualification formula automatically reclassifies several destinations based on seasonal price shifts and local lodging costs across the country.
The updated guidance adds multiple destinations to the high-cost roster while dropping one Florida market that previously met the daily spending threshold:
- Tucson, Arizona: added to the high-cost locality list
- San Mateo, Foster City, and Belmont, California: added to the high-cost locality list
- Albuquerque, New Mexico: added to the high-cost locality list
- Cody, Wyoming: added to the high-cost locality list
- Panama City, Florida: removed from the high-cost locality list
Comparison with previous cycles and implementation schedule
In the 2025-2026 annual cycle, governed by Notice 2025-54, the high-low substantiation rates were set at $319 for high-cost areas and $225 for standard localities, figures that had remained frozen with zero increase compared to the 2024-2025 period. The operational rules governing how companies and self-employed professionals apply these daily figures continue to be defined by IRS Revenue Procedure 2019-48.
The rates published in Notice 2026-60 officially take effect on Thursday, October 1, 2026, marking the start of the 2026-2027 fiscal cycle. The established figures will remain in force for taxpayers through Thursday, September 30, 2027.