What Is A Per Diem?
Per Diem, Latin for "per day" or "for each day" is a common business term for the amount of money that is given to an employee, student or other individual for their daily needs.You might ask yourself why an employer would opt to hand out a per diem rate instead of requiring an expense report. It seems that the more detailed expense report would cover all of the necessary costs accurately.There are actually 2 good reasons.
- Cost savings
- Less work (for both sides)
Expense reporting is an onerous job for both sides, especially with frequent travel, and the per diem rate structure helps to alleviate it.Another added benefit to issuing per diems as opposed to requiring expense reports is that employees are allowed to keep any amount of money they don't spend!That's right. As long as the per diem falls at or under the GSA rate, it's 100% deductible for the employer and the thrifty employee can pocket the difference.The employer benefits from this structure in 2 ways.
- The rate they give is tax deductible and less paperwork is involved.
- Employees are careful about how they spend the money.
If you were an employer would you rather issue per diems for a set amount or rely on your employees to hand over expense reports which may include a lot of small or very expensive items?Is it worth the extra work on both sides to create and process detailed expense reports?What about the added costs of all itemized business expenses and employees that have to process these reports and reimburse?It's pretty easy to see why employers love the GSA per diems. It relieves them and their employees of extra expense reporting paperwork and eliminates expensive or unnecessary expenses. As an added bonus the fiscally prudent employee is allowed to keep the change!
Per Diem Rates (Federal GSA Rates)
Per diem rates are set by the Government Services Administration, commonly known as the GSA. Each fiscal year, and effective Oct 1st, the rates are set by the GSA for employees traveling with the continental United States and abroad.You might wonder why employers don't just give out as much cash as they feel the employee needs for the trip. Well, it's not that simple. Per diem rates paid above the GSA Federal Per Diem Rate qualify as taxable income to the employee!
What Isn't Included In Per Diem Rates?
Per diem does not include transportation costs. If the employer is willing to cover the costs of transportation (many do), then these fees will have to be taken care of directly by the employer, or through reimbursement.An example of reimbursement would be mileage. Assuming the employee is traveling in their own vehicle, they can use the IRS standard mileage deduction and either file for reimbursement with their employer, or deduct the applicable cost on their year end tax filing.If this employee was using Everlance, their mileage would be tracked automatically and any business expenses or revenue
incurred on the trip (including accounting for per diem's) could be added in the app to create a full history that can be exported for reimbursement or tax purposes.Download Everlance for free and start automatically tracking your business miles & expenses!
Finding Per Diem Rates For Each City
The GSA rate tool has made it incredibly easy to find detailed per diem rate information for the state & city in which an employee may be working in. While we can't list them all, and definitely recommend you check out the website yourself - here are some of the highlights for major US Cities.Take note that based on the month, per diem prices may change. So below we'll list this in an easy-to-read table for each city.[table id=5 /]