Travel assignments at new plant and construction sites often come with per diem, and it can be a big part of what you take home. Enter your hourly rate, the daily per diem and how long the assignment runs to see your weekly total, your real hourly value, and how much of the per diem can be tax-free.
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What per diem covers
Per diem is a daily allowance for lodging, meals and incidental expenses when you work away from home. Most employers use the federal GSA rates as the yardstick. For fiscal year 2027, which started October 1, 2026, the standard rate is $113 a night for lodging and $68 a day for meals and incidentals. Many cities have higher rates, so look up your site on the GSA per diem page.
When per diem is tax-free
- You have a tax home somewhere else and you are traveling away from it overnight for work.
- Your employer pays under an accountable plan: the payments are tied to business travel and anything over the allowed amount is returned or reported.
- It stays within the federal rate. Anything above it is usually taxable and shows up on your W-2.
- The assignment is temporary. If it is realistically expected to last more than one year, it is treated as indefinite and per diem is generally taxable.
The IRS rules are in Publication 463. This is general information, not tax advice.
5 questions to ask before you accept
- Is per diem paid daily or weekly, and is it a flat amount or reimbursed with receipts?
- Is it paid 7 days a week, or only on days I work?
- Is it still paid on holidays or weekends when I fly home?
- Is it reduced if the company provides housing or meals?
- Will any of it show up as taxable pay on my W-2?
A red flag I watch for
Some offers lower the hourly rate and move that money into “tax-free” per diem. The IRS does not allow employers to recharacterize wages as per diem, and a lower base rate also means lower overtime pay and smaller 401(k) contributions. Compare the full package with the offer comparison calculator, and check the overtime math with the overtime calculator.
FAQ
Does per diem count toward overtime pay?
Generally no. Under federal wage rules, reasonable per diem that approximates real travel expenses is left out of the regular rate used for overtime. That is why a low base rate with high per diem lowers your overtime pay.
What happens on the first and last day of travel?
Under GSA rules, the meals and incidentals rate is 75% on the first and last travel day. Private employers often follow the same rule, but check your company policy.
What if my assignment gets extended past a year?
Once it is realistically expected to go beyond one year, per diem from that point is generally taxable. Ask your employer how they handle extensions before you agree to one.