If you’ve ever traveled for work and heard someone mention “per diem,” the concept is simpler than the term makes it sound. Per diem just means “per day,” and in a business context, it refers to a fixed daily allowance for travel costs instead of tracking every single receipt.
Quick answer: a per diem rate is a set daily amount covering lodging, meals, and incidental expenses while traveling for business. For fiscal year 2027 — October 1, 2026 through September 30, 2027 — the standard federal rate for most of the continental US is $181 per day: $113 for lodging and $68 for meals and incidentals. Rates run higher in specific cities. Below is how it actually works and when it makes sense for a small business to use it.
The 2027 rates, and what changed
In the US, the General Services Administration (GSA) sets standard per diem rates every fiscal year for federal employee travel, and a large share of private businesses use the same rates as a practical benchmark, since they’re publicly published, updated annually, and defensible if a rate is ever questioned.
After holding rates flat for fiscal 2026, the GSA raised the standard lodging rate for fiscal 2027:
| Standard CONUS rate | FY 2026 | FY 2027 |
|---|---|---|
| Lodging | $110/night | $113/night |
| Meals & incidental expenses (M&IE) | $68/day | $68/day |
| Total | $178/day | $181/day |
The $181 total is the default rate for locations without a specifically listed higher rate. For fiscal 2027, 295 non-standard areas — generally higher cost-of-living cities and regions — have their own published rates that run higher, with M&IE alone ranging from $68 to $92 depending on location. If you set your travel policy or your travel budget before October 1, 2026, it’s still using last year’s $178: update it, because the old number now under-reimburses every standard-rate trip by $3 a day.
One more rule worth knowing: on the first and last day of a trip, M&IE is paid at 75% of the full rate — $51 instead of $68 at the standard rate — because travelers are only away for part of those days.
What a per diem rate actually covers
A per diem rate bundles two categories of travel cost. Lodging covers the hotel or accommodation for the night. Meals and incidental expenses, usually written as M&IE, covers food for the day plus small costs like tips for hotel staff or baggage handling. Some organizations pay lodging and M&IE as one combined daily rate; others split them, reimbursing actual lodging cost separately while using a flat M&IE rate for meals.
Why a business would use per diem instead of actual expenses
It removes the need to collect every receipt. Instead of an employee or contractor saving a hotel bill, three meal receipts, and a tip record for a single travel day, a per diem rate covers all of it as one number. This cuts down meaningfully on the admin burden of expense reporting, both for the traveler and whoever processes the reimbursement afterward.
It’s predictable for budgeting. Knowing the daily rate in advance makes it straightforward to estimate the total cost of a trip before it happens, since the number doesn’t depend on which restaurant someone picks or how their hotel bill compares to a colleague’s.
It stays outside taxable income, within limits. If a per diem payment doesn’t exceed the federal rate for that location, it’s generally not counted as taxable income to the employee or contractor receiving it. Go above the federal rate and the excess portion typically becomes taxable. This is one of the more commonly misunderstood parts of per diem, so it’s worth confirming with a tax professional before setting an internal policy, especially for a rate structure that differs from the GSA’s own numbers.
How this applies to freelancers and small businesses specifically
A freelancer traveling for a client project can generally deduct actual travel expenses, or use the per diem rate as a simplified way to calculate the deductible amount for meals specifically (the lodging portion generally still needs to be tracked at actual cost for self-employed individuals — this is one of several areas where the rules for employees and the self-employed diverge). A small business reimbursing an employee’s travel can set an internal per diem policy at, at, or below, the GSA rate to keep the reimbursement non-taxable to the employee.
Either way, the practical benefit is the same: less time spent reconciling receipts against actual spend, and a number that’s easy to plan a trip’s budget around in advance.
A simple example
A consultant travels from Chicago to Atlanta for a three-day client engagement. Atlanta is a non-standard area with its own published rate — for fiscal 2027, $86 per day for M&IE, with lodging capped higher than the standard $113 depending on the month. Applying the 75% rule to the first and last days, the meal allowance for the trip comes to $64.50 + $86 + $64.50 = $215, with no meal receipts to collect. Their hotel is tracked at actual cost, as many self-employed per diem calculations only apply the flat rate to the M&IE portion. At tax time, the meal portion is calculated using the per diem method, while the hotel bill is entered as an actual expense — both categorized and ready without reconstructing three days of miscellaneous receipts from memory.
For comparison, the same three-day trip somewhere with no non-standard rate would use the standard figures: M&IE of $51 + $68 + $51 = $170, plus lodging up to $113 a night.
Where this connects to bookkeeping
Whether a business uses per diem or actual expenses, the travel cost still needs to be recorded and categorized correctly to show up right at tax time. Mixing the two methods inconsistently, or forgetting to log a trip at all, is a common source of messy books. See our guide to small business bookkeeping for beginners for the basics of keeping this organized as you go, and our quarterly estimated tax guide for how travel deductions fit into the bigger picture.
ABsort tracks expenses, including travel, tied to specific clients or projects, so a per diem calculation or an actual-expense receipt logs into the same system instead of a separate spreadsheet, starting at $12/month.
Frequently asked questions
What is the per diem rate for 2027?
The GSA’s standard CONUS rate for fiscal 2027 (October 1, 2026 to September 30, 2027) is $181 per day: $113 for lodging and $68 for meals and incidental expenses. Higher-cost locations have non-standard rates above this; look up the specific city or ZIP before you travel.
Did the per diem rate change from 2026?
Yes. The fiscal 2026 standard rate was $178 per day ($110 lodging + $68 M&IE). For fiscal 2027, lodging rose to $113 while M&IE stayed at $68, for a total of $181.
How much per diem do you get on the first and last day of a trip?
Lodging is paid in full for each night away, but M&IE drops to 75% on the first and last travel days — $51 instead of $68 at the standard rate.
Is per diem taxable income?
Not if it stays at or below the federal rate for the location and is paid under an accountable plan. Any amount above the federal rate is generally taxable to the person receiving it.
This guide is for general informational purposes and isn’t a substitute for advice from a licensed tax professional, since per diem rules can vary by situation. Rates shown are the GSA’s published standard CONUS rates, checked October 2026; always confirm your destination’s rate in the GSA lookup before traveling.