Types of Per Diem Allowances Explained

"Per diem allowance" can mean several different things depending on who is paying and under what rules. Here's how to tell them apart.

1. GSA per diem (federal standard)

The General Services Administration publishes separate rates for lodging (per night) and M&IE (per day) for hundreds of US cities. These are the benchmark for federal employee travel and for most government contractor reimbursements. They vary by city and, for lodging, by month.

2. Private-employer per diem

Many companies mirror the GSA rates to keep reimbursements tax-free. Others set a single flat daily allowance (e.g. $250 all-in) that employees can use as they see fit. A flat rate above the GSA level for a given city turns the excess into taxable income.

3. M&IE-only per diem

Some employers pay per diem only for meals and incidentals and reimburse actual lodging on receipt. This is the most common hybrid — it removes the need for meal receipts without giving employees a blank cheque for hotels.

4. International per diem (OCONUS)

Travel outside the continental US uses rates set by the Department of Defense (for military and civilian DoD employees) or the State Department (for foreign affairs employees). These OCONUS rates can be significantly higher than domestic GSA rates in expensive cities.

Tax treatment across allowance types

• At or below the GSA rate, with a trip report: fully tax-free under the IRS accountable plan.
• Above the GSA rate: excess is taxable wages, subject to income tax and payroll tax.
• No report required: the entire per diem becomes taxable, regardless of amount.