TL;DR: Per diem is a daily allowance for lodging, meals and incidentals when you travel away from your tax home for work. It is usually tax-free only if you keep a real tax home, the assignment is realistically expected to last one year or less, and the employer pays it under an accountable plan at or below federal rates. For FY2027, the GSA standard rate is $113 lodging plus $68 meals and incidentals per day.
I recruit for construction and startup projects at Korean battery, semiconductor and auto plants across the U.S., and per diem comes up on almost every travel role. The question I hear most: “Is the per diem taxed?” The honest answer is “it depends,” and here is what it depends on.
What per diem actually covers
“Per diem” means “per day.” On a construction travel job it is a fixed daily amount for the extra costs of living away from home.
- Lodging: a hotel, extended-stay, rental or RV spot near the site.
- Meals: breakfast, lunch and dinner while you are away.
- Incidentals: small costs like tips. Federal rules combine meals and incidentals into one number called M&IE.
Per diem is not the same as a relocation package. Relocation is for a permanent move. Per diem is for a temporary stay while your real home stays where it is.
FY2027 rates (from October 1, 2026)
Many private employers use federal rates, because the IRS treats a per diem at or below federal rates as substantiated for the amount. Per GSA Per Diem Bulletin FTR 27-01, FY2027 rates apply from October 1, 2026, through September 30, 2027:
- Standard CONUS lodging: $113 per night (up from $110).
- Standard M&IE: $68 per day.
- 295 non-standard areas have their own, higher rates.
The county decides the rate, not the nearest big city, so look up the site’s ZIP on the GSA per diem lookup. Some employers use the simpler IRS high-low method instead: IRS Notice 2026-60 sets $329 per day for high-cost localities and $230 for all other CONUS localities, for travel on or after October 1, 2026.
When per diem is tax-free (and when it is not)
Three things generally have to be true.
1. You are away from your tax home. Your tax home is generally your regular place of business, per IRS Publication 463. If you have no regular place of business and no place where you regularly live, your tax home is wherever you work, so per diem cannot be tax-free.
2. The assignment is temporary. Pub 463 draws a hard line at one year. If the job is realistically expected to last more than one year, it is indefinite, even if it ends early. Plant builds can run for years, so ask for the expected assignment length in writing.
3. The employer uses an accountable plan. Per IRS Publication 15, you have to substantiate expenses and return any excess within a reasonable period. If a per diem exceeds the federal rate and you keep the extra, the excess is taxable wages.
| Scenario | Taxable? |
|---|---|
| You keep a real home, the job is expected to last 1 year or less, per diem is at or below federal rate, accountable plan | Generally no |
| Same as above, but per diem is above the federal rate and you keep the extra | The excess is taxable |
| Assignment is realistically expected to last more than 1 year from the start | Yes |
| You have no tax home (itinerant, nothing to go back to) | Yes |
| “Per diem” paid whether or not you travel, or carved out of your regular wage | Yes, it is wages |
Warning: per diem baked into your hourly rate
Watch for this setup. An employer quotes a “package” per hour, then splits it into a lower taxable wage plus a “tax-free” per diem, and everyone gets the same total whether they travel or not.
In Rev. Rul. 2012-25, the IRS ruled that a plan paying nurses the same gross pay whether or not they traveled is not an accountable plan, so the payments are wages. A lower base wage can also mean lower overtime, lower unemployment benefits and lower Social Security earnings on your record. Red flags:
- Local hires get the same per diem as travelers.
- The hourly rate drops by the same amount the per diem is added.
- Per diem is calculated per hour worked instead of per day away.
Per diem and your overtime rate
If you are non-exempt, overtime is 1.5 times your “regular rate.” Not sure which you are? I explain it in exempt vs non-exempt overtime.
Under 29 CFR 778.217, a real travel reimbursement that reasonably approximates your costs stays out of the regular rate, and an amount at or below the federal per diem maximum is considered reasonable. A “per diem” that is really pay can raise it.
“My overtime rate doesn’t look like 1.5 times my pay”
Candidates on travel jobs often ask me this after their first few pay stubs. The doubt is reasonable. In June 2026 the Labor Department recovered $1.73 million for 1,666 hourly workers on an EV battery manufacturing campus in Tennessee because bonuses were left out of the rate used to figure overtime.
Ask before you sign: “Is my per diem at or below the GSA or IRS rate for this location, and which payments go into my overtime rate?” Then check the math with the overtime calculator.
Questions to ask before you travel
On Korean plant projects you may be paid by a staffing firm or subcontractor, so ask your actual employer, not the site. Put the answers next to your offer letter checklist.
- Is per diem paid 7 days a week, or only on days worked?
- Is it paid on days off, weather days and holidays?
- If company housing is provided, is the lodging portion removed?
- Is it paid at GSA rates, the IRS high-low rate, or a flat company rate?
- Will it show on my W-2 in box 1 (taxable) or box 12 code L (nontaxable)?
- What is the expected length of this assignment, in writing?
FAQ
Do I have to spend all my per diem?
No. If the employer pays at or below federal rates under an accountable plan, keeping what you do not spend is generally fine. You still need to show the time, place and business purpose of the travel.
Is per diem taxable if the job lasts more than a year?
Generally yes. Under Pub 463, an assignment realistically expected to last more than one year is indefinite, and the work site becomes your tax home.
Can I deduct my travel costs if my employer does not pay per diem?
Usually not as a W-2 employee. Pub 463 explains that miscellaneous itemized deductions for unreimbursed employee expenses have been suspended for tax years beginning after 2017.
Not legal or tax advice. Rules depend on your facts, so check with a tax professional. Sources: GSA Per Diem Bulletin FTR 27-01; IRS Notice 2026-60; IRS Publication 463 (2025); IRS Publication 15 (2026); Rev. Rul. 2012-25 (IRB 2012-37); 29 CFR 778.217 (eCFR). Rates as of October 2026.
