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 temporary (realistically expected to last one year or less), and the employer pays it under an accountable plan at or below federal rates. For FY2027 (from October 1, 2026), the GSA standard CONUS 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. Per diem comes up on almost every travel role. And almost every week someone asks me the same thing: “Is the per diem taxed?” The honest answer is “it depends,” and most people only find out what it depends on when their first W-2 shows up.
I have seen two candidates compare offers for the same site, same trade, same hours. One had a higher hourly rate. The other had a lower rate plus per diem. On paper they looked close. In real life, one was paying tax on everything, and the other was not, because of how the per diem was set up and where each person actually lived. This guide is what I walk people through before they pack the truck.
What per diem actually covers
“Per diem” means “per day.” On a construction travel job it is a fixed daily amount meant to cover the extra costs of living away from home. It usually has three parts:
- 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. That difference is the whole tax story, so keep it in mind.
FY2027 GSA per diem rates (effective October 1, 2026)
Most private employers do not have to use federal rates, but many do, because the IRS treats a per diem at or below federal rates as substantiated for the amount of the expense. The General Services Administration (GSA) sets those rates for each federal fiscal year. Per GSA Per Diem Bulletin FTR 27-01, FY2027 rates apply to travel from October 1, 2026, through September 30, 2027:
- Standard CONUS lodging rate: $113 per night (up from $110).
- Standard M&IE rate: $68 per day.
- M&IE tiers range from $68 to $92.
- 295 non-standard areas (NSAs) have their own, higher rates. Everywhere else uses the standard rate.
A lot of new plant sites sit in counties that are not big metro areas, so the standard rate is often what applies. But you have to check by county or ZIP. Here are examples I could verify directly on GSA’s FY2027 tables:
| Location (county) | Lodging / night | M&IE / day | First and last travel day M&IE |
|---|---|---|---|
| Standard rate (any county without its own rate) | $113 | $68 | $51.00 |
| Austin, TX (Travis) | $184 all year | $80 | $60.00 |
| Taylor / Round Rock area, TX (Williamson) | Not listed as its own area on GSA’s FY2027 Texas table, so standard $113 | $68 | $51.00 |
| Atlanta, GA (Fulton / DeKalb) | $188 (Oct to Dec, Apr to Sep), $207 (Jan to Mar) | $86 | $64.50 |
Sources: GSA FY2027 tables for Texas and Atlanta. Lodging rates exclude taxes. For a site near Savannah, Clarksville or the Warren/Lordstown area of Ohio, look up the exact ZIP on the GSA per diem lookup. The county decides the rate, not the nearest big city.
The IRS high-low method (Notice 2026-60)
Some employers do not want to track hundreds of city rates. The IRS lets them use a simpler “high-low” method: one rate for high-cost localities, one for everywhere else in the continental U.S. IRS Notice 2026-60 sets these for per diem paid for travel on or after October 1, 2026. It supersedes Notice 2025-54.
| IRS rate (from Oct 1, 2026) | Total per day | Meals portion |
|---|---|---|
| High-cost localities | $329 | $86 |
| All other CONUS localities | $230 | $74 |
| Incidental expenses only | $5 | n/a |
| Transportation industry M&IE (CONUS) | $80 | n/a |
The notice also points to transition rules for the last three months of 2026, so an employer may still be on last year’s numbers until January. If your weekly per diem looks a little different from what you read online, that may be why.
When per diem is tax-free (and when it is not)
For per diem to stay off your taxable wages, 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 or post of duty, according to IRS Publication 463. For many construction workers, it is the area where you normally live and work between jobs. Pub 463 also says that if you have no regular place of business and no place where you regularly live, you are an itinerant and your tax home is wherever you work. In that case you are never “away from home,” so per diem cannot be tax-free. I see this with people who give up their apartment and move from site to site with nothing to go back to.
2. The assignment is temporary, not indefinite
Pub 463 draws a hard line at one year. An assignment in a single location is temporary if it is realistically expected to last (and does in fact last) one year or less. If it is realistically expected to last more than one year, it is indefinite, even if it ends early. Once it is indefinite, that location becomes your new tax home and per diem becomes taxable.
This matters a lot on plant builds. A Georgia battery plant construction site can run for years. If you are hired “for the duration of the project” and the project schedule is two years, that is hard to call temporary. Ask what the expected assignment length is, and get it in writing.
3. The employer uses an accountable plan
Per IRS Publication 15, an accountable plan requires that employees (1) paid or incurred allowable expenses while working, (2) substantiate them to the employer within a reasonable period, and (3) return any amounts above substantiated expenses within a reasonable period. A per diem at or below federal rates is treated as substantiated for the amount, though you still have to show the time, place and business purpose of the travel.
If the plan fails, payments are wages and are taxed as supplemental wages. If a per diem exceeds the federal rate and you do not return the extra, the excess is reported as taxable wages, and the substantiated amount shows in box 12 of your W-2 with code L.
| 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 |
| Expected 1 year or less, then the schedule changes and it is expected to run longer | Generally yes, from the date the expectation changes |
| You have no tax home (itinerant, nothing to go back to) | Yes |
| You live within normal commuting distance of the site | Generally yes, you are not away from home |
| “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
Here is the setup I warn people about. An employer quotes a “package” of, say, a set amount per hour, then splits it into a lower taxable wage plus a “tax-free” per diem. Everyone gets the same total whether they travel or not. That looks great on your net check. It is also exactly what the IRS calls wage recharacterization.
In Rev. Rul. 2012-25, the IRS looked at a per diem plan where nurses got the same gross pay whether or not they traveled. It ruled the arrangement fails the business connection requirement, so it is not an accountable plan. The payments are wages. The risk is not only the employer’s. A lower base wage can also mean lower overtime, lower unemployment benefits and lower Social Security earnings on your record.
Red flags to watch for:
- Local hires get the same per diem as travelers.
- The hourly rate drops by the same amount the per diem is added.
- Nobody asks for your permanent address or where you are staying.
- Per diem is calculated per hour worked instead of per day away.
Per diem and overtime: the regular rate question
If you are non-exempt, overtime is 1.5 times your “regular rate,” not just your base hourly rate. (If you are not sure which you are, read my guide on exempt vs non-exempt overtime.) The question is whether per diem goes into that regular rate.
Under 29 CFR 778.217, payments that reimburse expenses you incur for the employer’s benefit, including living expenses away from home on business travel, are not included in the regular rate, as long as the amount reasonably approximates the actual expense. A reimbursement is considered reasonable per se if it does not exceed the federal per diem maximum for the same type of expense. But if the employer pays for costs you would normally carry for your own benefit, that payment increases the regular rate.
In plain terms: a real travel per diem at or below GSA rates usually does not raise your overtime rate. A “per diem” that is really pay may. On ramp-up phases at Korean plants, 60-hour weeks are common, so this can add up fast. For prevailing wage jobs, also see my post on Davis-Bacon and construction overtime rules.
“My overtime rate doesn’t look like 1.5 times my pay”
Candidates on travel jobs often ask me some version of this after their first few pay stubs: the hourly is right, the per diem shows up, but the overtime line feels short, and they’re not sure it’s worth the awkwardness of asking. That 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.
Per diem is treated differently. Under 29 CFR 778.217, a travel reimbursement can stay out of the overtime rate when it reasonably approximates real expenses, and an amount at or below the federal or IRS per diem allowance is treated as reasonable by definition. If a “per diem” is disproportionately large, the excess goes back into the regular rate, and money that covers everyday costs like commuting or lunch doesn’t count as a reimbursement at all. Going over the federal rate doesn’t automatically make it unreasonable, and I couldn’t find an official dollar line beyond that safe harbor.
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?” You can check the math with the overtime calculator.
What’s different on Korean plant projects
A few patterns I see on Korean battery, chip and auto supplier builds:
- Layers of employers. You may be paid by a staffing firm or subcontractor, not the owner or general contractor. The per diem policy is your actual employer’s, so ask them, not the site.
- Expat vs local hire. Staff sent from Korea are often on a separate assignment package. Do not compare your per diem to theirs. Different rules, different tax situation.
- Schedules that stretch. Plant schedules move with HQ decisions. A 9-month assignment can quietly become 18 months. Track it, because the one-year rule follows the realistic expectation.
- Company housing. Some sites offer shared housing or a hotel block. Then the lodging part of the per diem may disappear and you only get M&IE.
If you are looking at safety roles on these sites, my guide to safety jobs at Korean battery and chip plants covers what the work looks like day to day.
Questions to ask before you travel
I tell candidates to ask these before they accept, not after the first paycheck. Put the answers next to your offer letter checklist.
- Is per diem paid daily or weekly? What is the exact amount?
- Is it paid 7 days a week, or only on days worked?
- Is it paid on days off, weather days and holidays?
- What happens when I fly or drive home for a weekend? Is per diem stopped? Is travel home reimbursed?
- 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 proof of my permanent address do you need?
- What is the expected length of this assignment, in writing?
- Is the hourly rate the same for local hires and travelers?
How to compare two offers with per diem
- Write down the hourly rate and expected weekly hours for each offer.
- Add the weekly per diem, using the real number of paid days (5 or 7).
- Price your actual lodging near the site. If rent eats the whole per diem, the “extra” is gone.
- Decide if the per diem is likely tax-free for you, using the table above. If not, treat it like wages.
- Compare overtime on the base rate. The lower base usually means lower overtime pay.
FAQ
Do I have to spend all my per diem?
No. If the employer pays at or below federal rates under an accountable plan, the IRS treats it as substantiated for the amount, so 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.
What are the FY2027 standard per diem rates?
$113 lodging and $68 M&IE per day for travel from October 1, 2026, through September 30, 2027, per GSA. Many counties have higher rates, so check by ZIP.
Does per diem count toward overtime?
Real travel reimbursement that reasonably approximates your costs is excluded from the regular rate under 29 CFR 778.217, and at or below federal rates it is considered reasonable. Payments that are really wages can be included.
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. That is why it pays to negotiate per diem upfront.
Not legal or tax advice. Rules depend on your facts, so check with a tax professional. Sources: GSA Per Diem Bulletin FTR 27-01 and FY2027 rate tables (gsa.gov); 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.
