The IRS has announced a major adjustment in the per diem rates for meals and incidental expenses (M&IE) for transportation workers, including truck drivers. This increase, set to take effect on October 1, 2024, represents one of the most substantial jumps in recent years and is expected to impact the trucking industry significantly.
IRS Per Diem Rate Jump
For fiscal year 2025, the IRS has set the per diem rate for truck drivers traveling within the continental U.S. at $80 per day. This marks a 15.9% increase from the previous rate of $69, which had remained stagnant for the past two fiscal years. For travel outside the continental U.S., the per diem rate will rise to $86 per day.
This substantial jump is particularly noteworthy given that the per diem rate only increased by $3 in 2023. The new rate will directly affect how much transportation companies can reimburse drivers for meals and incidental expenses incurred while on the road.
According to the IRS, $5 of the per diem is allocated for incidental expenses only, which may include costs like tips and other small fees.
Impact on Truck Drivers’ Earnings
The increase in the trucker per diem rate has the potential to boost drivers’ overall earnings, particularly for those who spend extended periods on the road. For example, a driver who works 200 days per year and receives the new per diem rate for each of those days would see an increase of $2,200 annually compared to the past two years.
However, it’s important to note that not all drivers are eligible for the per diem. According to IRS guidelines, only truckers who spend a substantial portion of their day on the road and have to stay overnight away from home are eligible. Local drivers who start and end their day at home or a depot, even if they max out their hours-of-service (HOS) limits, typically do not qualify for per diem payments.
High-Low Substantiation Method and High-Cost Localities
The IRS also allows for a high-low substantiation method for per diem payments, which adjusts reimbursement rates based on whether the transportation occurred in a high-cost or low-cost area. Under this method, the per diem rates for fiscal year 2025 will be:
- $86 per day for high-cost areas (up from $74 in fiscal year 2024)
- $74 per day for low-cost areas (up from $64 in fiscal year 2024)
In addition, the per diem rate for both lodging and meals will increase to $319 for high-cost areas and $225 for low-cost areas, up from $309 and $214, respectively.
Several new regions were added to the list of high-cost localities, including Los Angeles, Mammoth Lakes, and Palm Springs, California; Boise, Idaho; and Bend, Oregon. Truck drivers operating in these regions year-round or during designated parts of the year will qualify for the higher per diem rate.
High-Cost Areas and New Additions
The IRS has updated its list of high-cost localities for fiscal year 2025, impacting trucking companies that serve these regions. Some high-cost areas are only considered as such for part of the year. For example, truck drivers in Gulf Shores, Alabama, can receive the higher per diem rate only between June 1 and July 31. Meanwhile, regions such as Los Angeles, California, will be considered high-cost throughout the entire year, offering more consistent per diem benefits for truckers working in that area.
Notably, several areas have been dropped from the high-cost locality list, including Oakland, California, and Punta Gorda, Florida.
Trucker Per Diem Increase: Tax Implications
Per diem payments are not considered taxable income for truck drivers, which is one of the benefits of this IRS system. Employers can deduct the per diem payments from their taxable income, reducing their tax liability. However, if a company chooses to pay drivers more than the IRS per diem rate, the excess payment could be considered taxable income for the driver.
Transportation companies that reimburse drivers for expenses typically align their payments with the IRS per diem rate, avoiding the need for employees to keep detailed receipts for meal and incidental expenses.
The IRS rates also offer some flexibility for transportation companies, as they can choose to adopt the high-low substantiation method or simply stick to the standard rates depending on their operations and routes.
What The Trucker Per Diem Rate Increase Means for the Trucking Industry
This trucker per diem rate increase offers benefits for both drivers and trucking companies. For drivers, it means higher reimbursements for meals and incidental expenses, potentially boosting their take-home pay if they spend long periods on the road. For companies, it provides an opportunity to deduct higher amounts from their taxable income, though this comes with the added complexity of navigating high-cost and low-cost area classifications.
As the trucking industry continues to face challenges, from driver shortages to rising operating costs, this increase in the per diem rate offers some relief, albeit in a specific area.
