20.4 IRS Meal Allowance
If you find it difficult to keep records of meal costs while away from home (20.3) on business trips, you may prefer to claim an IRS meal allowance. In government tables, the allowance is referred to as the “M&IE” rate (meals and incidental expenses). In addition to meals and tips for food servers, the allowance (M&IE rate) includes a limited number of “incidental” expenses such as fees and tips for porters, baggage carriers, hotel maids, or room stewards. Self-employed individuals may claim the M&IE allowance as well as employees who have expenses that are not reimbursed under an “accountable” plan (20.32).
IRS Alert
Meal allowance on 2012 tax returns.
For travel within the continental U.S. (referred to as CONUS locations), the standard meal allowance (M&IE) for 2012 is usually $46 per day, but higher rates apply in major cities and other high-cost locations (such as resort areas) designated by the government. The basic and high-cost-area meal rates are determined by the federal government’s General Services Administration (GSA) and the IRS allows taxpayers to use the applicable rates in figuring their meal allowance deduction.
You must keep a record of the time, place, and business purpose of the trips. As long as you have this proof, you may claim the allowance even if your actual costs are less than the allowance.
The IRS provides the CONUS M&IE rates in Publication 1542, available online at www.irs.gov/formspubs/index.html. Publication 1542 is available only online; print copies can no longer be ordered. Publication 1542 shows the CONUS M&IE rates in tables that coincide with the start of a new fiscal year for the federal government each October. For example, Table 4 of the October 2011 revision of Publication 1542 shows the rates applicable for business trips from October 1, 2011 through September 30, 2012. When the GSA changes the nationwide rates for the fiscal year starting October 1, 2012, the IRS will revise Publication 1542 and the rates for October 1, 2012 through September 30, 2013, will be shown in a new Table 4 and the rates for the first nine months of 2012 will be in Table 3. The IRS will post other online revisions to Publication 1542 throughout the year following GSA rate changes for particular localities.
The CONUS rates can also be obtained from the GSA website at www.gsa.gov; click on “Per Diem Rates.”
In computing your meal allowance (M&IE) deduction for 2012 business trips, you can apply the rates that were in effect for the first nine months of the year to business trips in the last three months. You may use the first set of rates for the first nine months and the updated rates for the last three months. For trips within the last three months, you must consistently use either the rates in effect for the first nine months or the revised rates that took effect on October 1; you cannot switch between the sets of rates on a trip-by-trip basis. If you travel to more than one city on the same day, use the meal allowance for the area where you stay overnight.
Travel outside the continental United States.
Different rates apply for travel in Alaska, Hawaii, Puerto Rico, and U.S. possessions, as well as for travel to foreign countries. These rates (OCONUS) can be obtained by using links from the GSA website at www.gsa.gov.
Transportation industry workers.
Employees or self-employed persons in the transportation industry may elect to claim a special M&IE rate. For the first nine months of 2012, the rate is $59 per day for any CONUS location and $65 per day for any OCONUS location. The rates may change effective October 1, 2012; see the e-Supplement at jklasser.com for an update. The special rate avoids the need to apply the CONUS or OCONUS rates on a locality-by-locality basis. You cannot combine the two methods. If the special rate is used for one trip, it must be used for all trips during the same year.
Allowance must be reduced.
The allowance is prorated for the first and last day of a trip. You may claim 75% of the allowance for the days you depart and return. Alternatively, you may claim 100% of the allowance if you are away for a regular “9-to-5” business day.
If you are an employee and claim a deduction based on the allowance, you must reduce the deduction by 50% on Form 2106 or Form 2106-EZ and the balance, when added to your other miscellaneous deductions, is subject to the 2% AGI floor on Schedule A (20.29). If you are self-employed, the allowance is claimed on Schedule C, where it is subject only to the 50% reduction (20.29).
A higher deduction percentage is allowed to interstate truck drivers, pilots, railroad operators, and other transportation industry employees subject to Department of Transportation hours of service limits, who are allowed to deduct 80% (instead of 50%) of meal costs.