GSA Raised FY2027 Per Diem Rates to $181 a Day: Update Your Accountable Plan Before October 1

On October 1, your company's travel reimbursement policy quietly goes stale. If your employee handbook or expense software still lists last year's federal per diem figures, every trip you reimburse after that date is measured against outdated caps — and if your reimbursements are not running through a proper accountable plan at all, the IRS treats those "reimbursements" as taxable wages, complete with income tax withholding and payroll taxes for both you and your employees. A three-dollar rate increase sounds trivial until it arrives bundled with a W-2 surprise.

Here is what changed for fiscal year 2027, why federal rates matter to a business that has never held a government contract, and the short checklist that keeps your travel reimbursements tax-free through fall travel season.

What Changed for FY2027​

The General Services Administration (GSA) published the fiscal year 2027 per diem rates in the Federal Register on September 10, 2026. They apply to travel performed from October 1, 2026, through September 30, 2027. The headline changes:

• Standard lodging rises from $110 to $113 per night. After a complete rate freeze in FY2026, the standard continental United States (CONUS) lodging allowance grows by $3.
• Meals and incidental expenses (M&IE) hold steady. The standard M&IE rate stays at $68 per day, and the M&IE tiers remain $68 to $92. GSA reviews M&IE on a three-to-five-year cycle rather than annually; the last M&IE increase took effect in October 2024.
• The combined standard day is now $181. That is $113 for lodging plus $68 for M&IE, the figure that applies in every locality without its own listed rate — which is most of the country.
• Non-standard areas (NSAs) tick down from 296 to 295. Localities with hotel costs above the standard rate keep their own higher lodging caps; Allentown, Pennsylvania returns to the standard rate this year.

The hotel industry welcomed the increase — the American Hotel and Lodging Association publicly applauded GSA for moving rates back toward market costs after the freeze year. For your business, the practical question is different: how do federal travel tables end up governing your private-sector reimbursements?

Why a Private Business Should Care About GSA Tables​

Nobody requires you to use federal rates for your own employees. But the IRS lets you piggyback on them, and the compliance savings are the reason most small businesses do.

Under the federal per diem substantiation method, when you reimburse an employee's lodging, meals, and incidental expenses at or below the federal rate for that locality, the IRS deems the amount substantiated. Your employee still has to report the time, place, and business purpose of the trip, but neither of you has to produce a receipt for every sandwich. Skip the per diem method and you are back in receipt-collection mode for every dollar — or your payments fail the substantiation test and land on the W-2 as wages.

There is also a simpler alternative for employers that do not want to look up 295 locality tables. The IRS high-low substantiation method collapses the entire country into two numbers: for the travel year that began October 1, 2025, the rates were $319 per day for high-cost localities and $225 everywhere else in CONUS, with $86 and $74 of those amounts respectively treated as the meals portion. Watch for the IRS notice covering the year starting October 1, 2026 — it typically lands in late September — and confirm whether those figures move before you lock in your policy.

A few mechanics worth knowing before you copy numbers into your handbook:

• First and last travel days are paid at 75 percent of M&IE. The federal rule reimburses three-quarters of the meals rate on departure and return days, and most private plans that mirror GSA follow the same convention.
• Incidentals are $5 inside every M&IE tier. That slice covers fees and tips given to porters, baggage carriers, and hotel staff. M&IE as a whole already includes taxes and tips, so travelers are not reimbursed for those separately.
• Trips have to be real travel. Per diem paid for same-day trips that do not require sleep or rest is taxable wages even under a flawless accountable plan. The "away from home overnight" rule is the tripwire that catches day-trip meal allowances.

The Accountable Plan: Three Rules Between You and Taxable Wages​

Using the right rates is only half the job. The payments also have to flow through an accountable plan — the IRS framework that separates genuine reimbursements from disguised compensation. It has exactly three requirements, and all three must be met:

1. Business connection​

The expense must be incurred because of your business — travel your employee undertakes on your behalf. Reimbursing commuting costs or personal side trips fails this test no matter how well documented they are.

2. Adequate substantiation within a reasonable time​

Employees must account for each expense: what it was, when and where it happened, and the business reason. The IRS safe harbor for "reasonable time" is 60 days after the expense is paid or incurred. Expense reports with dates, destinations, and business purposes, filed promptly, satisfy this — and as noted above, per diem amounts at or below the federal rate count as substantiated for the amount itself.

3. Return of excess amounts​

Any advance beyond what was spent must come back within a reasonable time — the safe harbor is 120 days. Advances themselves should go out no more than 30 days before the expense. The shorthand finance teams memorize is 30/60/120: advance within 30 days before, substantiate within 60 days after, return the excess within 120 days.

Miss any one of the three and the whole arrangement is a nonaccountable plan: every reimbursement becomes taxable wages subject to income tax withholding and Social Security and Medicare taxes. That is the expensive failure mode — not a penalty on the $3 rate change, but payroll taxes on your entire year's travel spend because substantiation drifted to 90 days or excess advances were never returned.

Special Cases: Owners, the Self-Employed, and Your Own Deduction​

Two groups live under different rules, and both show up constantly in small businesses.

Self-employed owners cannot use per diem for lodging. If you are a sole proprietor, partner, or LLC member taxed as either, the IRS lets you use the standard meal allowance (the M&IE-only method) instead of tracking actual meal costs — but lodging must be deducted at actual cost with receipts. The lodging per diem shortcut exists only for employer-to-employee reimbursements. S-corporation owners wearing an employee hat can be reimbursed like any other employee, as long as the plan covers them the same way.

Your meals deduction is still capped at 50 percent. Section 274(n) limits the employer's deduction for meal expenses to half the amount, and that limit reaches into per diem reimbursements through the deemed meals portion — the $86/$74 high-low splits, or the M&IE component of whatever federal rate you used. Lodging remains fully deductible. So when you reimburse a $181 standard day, you deduct the $113 lodging in full and half of the $68 meals portion. Book the two components to separate accounts from the start and tax time takes care of itself.

Your Before-October-1 Checklist​

Fall conference season collides with the rate changeover, so run through this list now rather than during expense-report triage in November:

1. Update the rates in your written policy. Change the standard lodging figure to $113 and the combined standard day to $181, effective for travel on or after October 1, 2026. If your policy hard-codes the old $110/$178 figures, that one edit is the whole update for most destinations.
2. Look up the cities your people actually visit. If your team regularly travels to any of the 295 non-standard areas, pull the current lodging caps from GSA's per diem lookup tool and note them in the policy. One stale city table creates the same exposure as a stale standard rate.
3. Check for the new IRS high-low notice. If you use the high-low method instead of locality rates, confirm the figures for the travel year starting October 1, 2026, before you publish. Do not assume the $319/$225 pair carries over.
4. Update your expense software and templates. Per diem tables buried in accounting software, spreadsheet templates, and approval workflows all need the new numbers — the policy document alone does not fix a hard-coded form.
5. Put the 30/60/120 clocks in writing. If your policy says "submit expenses promptly" without defining it, tighten the language to the safe-harbor windows and set up reminders. A defined deadline that employees meet beats a vague standard every time.
6. Brief your approvers on the two biggest traps. Day-trip per diem is wages, and unreturned excess advances are wages. Managers who approve expense reports should know both cold, because both look harmless on a report and both reclassify income.

Common Mistakes That Turn Reimbursements Into Wages​

Even businesses with written policies stumble on the same handful of issues:

• Paying per diem for non-overnight travel. The classic error: a $68 M&IE payment for a day trip to a client site two hours away. Without an overnight stay (or travel long enough to require rest), it is compensation, not a reimbursement.
• Letting substantiation slide past 60 days. Quarterly expense batches feel efficient and quietly blow the safe harbor. Monthly filing with automated reminders is the fix.
• Never collecting excess advances. A $2,000 advance against a $1,400 trip leaves $600 that must come back within 120 days. Forgiven advances are wages.
• Flat allowances with no accounting. A fixed monthly travel stipend paid regardless of trips taken is wages from dollar one. If you want flat payments, restructure them as advances under the accountable plan with real substantiation behind them.
• Mixing meals and lodging in one ledger account. When everything lands in a single "travel" account, computing the 50 percent meals limitation at year-end becomes a reconstruction project. Split them at entry.

Keep Your Travel Books Audit-Ready​

Per diem accounting rewards the same habit that good bookkeeping always rewards: recording structured detail at the moment of the transaction instead of reconstructing it months later. Each trip wants its own record — dates, destination, business purpose, the rate table applied, and lodging and meals posted to separate accounts so the 50 percent meals limit applies cleanly. If you bill travel back to clients, tagging each trip to the client or project at entry turns year-end job costing from archaeology into arithmetic.

That is exactly the workflow plain-text accounting excels at. With Beancount.io, your travel reimbursements live as transparent, version-controlled entries — every per diem rate, every trip tag, every lodging/meals split visible in text you own, with dashboards and reports in /fava/ when you want the visual view. Get started for free and see why developers and finance professionals are switching to plain-text accounting.

Simplify Your Financial Management​

As you update your travel policy for FY2027, take the same opportunity to tighten how travel flows through your books — separate lodging and meals accounts, per-trip business-purpose records, and timely expense filing all compound into a cleaner close. Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data — no black boxes, no vendor lock-in. Get started for free and keep every travel dollar audit-ready from day one.