IRS Notice 2026-60: New 2026–2027 Per Diem Rates ($329/$230)—Travel Reimbursement Checklist for NC Employers and S Corp Owners | YCL | YCL CPA

Author: YCL CPA ｜ YCL Tax, Accounting & Advisory

Bottom line in one breath

On Thursday, September 24, 2026, the IRS released Notice 2026-60, the special per diem rates for October 1, 2026 through September 30, 2027. Under the high-low method, travel to a high-cost locality is $329 per day and travel to any other location in the continental U.S. (CONUS) is $230 per day (up from $319 / $225), with the meal portion unchanged at $86 / $74. The transportation-industry meal and incidental expense (M&IE) rates stay at $80 CONUS / $86 OCONUS, and the incidental-expenses-only rate stays at $5 per day. GSA's fiscal 2027 federal rates set the standard CONUS rate at $113 lodging + $68 M&IE, and Raleigh (Wake County) at $142 lodging + $74 M&IE. If you run a Cary/RTP small business with traveling employees, pay daily travel allowances, or travel often as an S Corp owner, update your reimbursement policy and rate table this month—and remember that an owner with more than 10% of the employer cannot use the high-low method or a lodging per diem. This is compliance planning, not a promise of any tax result.

Background

A daily travel allowance paid under an accountable plan and not above the IRS-recognized amount lets the employee skip receipts to prove the amount of meals and incidentals, keeps the allowance off Form W-2 wages, and stays deductible for the business (with the meal portion subject to the §274(n) 50% limit). The rules are in Rev. Proc. 2019-48: a business can use GSA's locality-by-locality federal rates (lodging + M&IE, or M&IE only), or the simpler high-low method, which sorts all of CONUS into just two tiers—high-cost localities and everywhere else. The IRS updates the special rates each September: Notice 2025-54 covered October 1, 2025 to September 30, 2026, and Notice 2026-60 supersedes it for allowances paid—and travel taken—on or after Thursday, October 1, 2026. A locality is high-cost when its federal per diem is $280 or more (last year: $272). Separately, GSA's FTR Bulletin 27-01 raised the fiscal 2027 standard CONUS lodging rate from $110 to $113, kept standard M&IE at $68, and lists 295 non-standard areas.

Old rules vs. Notice 2026-60

1. High-low daily totals: Old (Oct. 2025–Sept. 2026)—$319 high-cost, $225 other. New (from Oct. 2026): $329 / $230.

2. Meal portion of high-low (subject to the 50% limit): Old—$86 / $74. New: unchanged at $86 / $74; the M&IE-only high-low rates are also $86 / $74.

3. Transportation-industry M&IE and incidentals-only: Old—$80 CONUS, $86 OCONUS; incidentals $5/day. New: all unchanged.

4. High-cost locality list: added Tucson, AZ, San Mateo/Foster City/Belmont, CA, Albuquerque, NM and Cody, WY; removed Panama City, FL; 15 localities—including Napa, New York City, Philadelphia and Hilton Head—changed their high-cost months. North Carolina's only high-cost locality is Kill Devil Hills (Dare County), June 1–August 31; Raleigh, Durham, Charlotte and Chapel Hill all use the $230 "other" rate under high-low.

5. GSA federal rates (locality method): fiscal 2026 standard CONUS lodging was $110; fiscal 2027 is $113, M&IE $68 unchanged. Selected NC fiscal 2027 rates: Raleigh (Wake) $142 + $74, Durham $124 + $74, Chapel Hill (Orange) $153 + $80, Charlotte (Mecklenburg) $143 + $80.

6. October–December transition (Rev. Proc. 2019-48): for any one employee, you must keep the method used in the first nine months of the year (locality per diem or high-low); but for October 1–December 31, 2026 you may use either the old or the new rates, as long as you apply them consistently to all employees under that method.

7. Owners (related parties): unchanged—an employee who owns more than 10% of the employer (under §267(b) related-party rules with the threshold lowered to 10%) cannot use a lodging per diem or high-low; lodging must be reimbursed from actual receipts, while an M&IE-only per diem remains available.

Self-check: does this affect you?

1. If you are a Cary/RTP small business with traveling staff: does your handbook or expense policy still list $319/$225 or last year's GSA table? Have you documented whether October–December uses old or new rates?

2. If you are an S Corp owner (more than 10%) and the company pays you a daily travel allowance: is your hotel reimbursed from receipts? If you have been paying yourself a flat high-low allowance, the excess may belong in wages.

3. If you pay a flat daily amount (say $300): is the part above the IRS-recognized rate run through payroll as W-2 wages with withholding? Are allowances for days not actually traveled returned within a reasonable period?

4. If you are self-employed (Schedule C) or a partner: you may use the M&IE rate to compute your meal and incidental deduction, but lodging cannot use a per diem—deduct actual cost and keep receipts.

5. If you run trucking, logistics or long-haul driving: are drivers on the $80/$86 transportation-industry M&IE or the regular M&IE? You cannot switch an individual mid-year, and meals for workers under DOT hours-of-service rules are 80% deductible.

Simplified example (illustration only—not a prediction or promised outcome)

A Cary S Corp (illustrative) sends a non-owner engineer and its 100% owner to Charlotte for client meetings in November 2026, three nights. For simplicity, we count three full travel days and ignore the 75% first/last-day proration; the company uses the new Notice 2026-60 rates for October–December.

1. Engineer (high-low): Charlotte is not high-cost, so $230 × 3 = $690 is deemed substantiated and, under an accountable plan, stays off the W-2. The meal portion, $74 × 3 = $222, is subject to the 50% limit, so the company deducts $111 of it plus the other $468 in full—about $579.

2. If the company instead pays a flat $280/day: $840 for three days, $150 above the recognized amount. That $150 is treated as paid under a nonaccountable plan and goes on the engineer's W-2 with income tax and FICA withholding.

3. Owner (more than 10%): high-low is not available. The hotel is reimbursed from receipts, e.g. $165 × 3 = $495; meals and incidentals can be paid as an M&IE-only per diem at Charlotte's federal rate, $80 × 3 = $240, of which 50% ($120) is deductible. Total reimbursed $735; deductible about $615.

4. Either way: you still need records of time, place and business purpose (calendar entries, client meeting notes). A per diem replaces proof of the amount only.

These figures are simplified: they ignore first/last-day proration, multi-city or cross-month trips, meals provided at conferences, state rules and other special situations. Actual results depend on your facts and company policy.

Action timeline

1. Now (October 2026): update your travel policy—state whether you use the locality method or high-low, whether October–December uses old or new rates (consistently for everyone), and load $329/$230 (meals $86/$74) or the GSA fiscal 2027 locality table into your expense forms.

2. By Thursday, October 15, 2026 (2025 extension filers): if 2025 included travel allowances for owners or employees, confirm accountable-plan treatment and that any excess was included in wages before filing.

3. After every trip: use the fixed-date safe harbor in Treas. Reg. §1.62-2(g)—advance no more than 30 days before the expense, substantiate time/place/business purpose within 60 days, and return unspent or unsubstantiated amounts within 120 days.

4. November–December 2026: year-end review of travel allowances—receipts for every owner hotel stay, and any flat-rate excess included in wages by the final payroll of Thursday, December 31, 2026.

5. From Friday, January 1, 2027: any switch between transportation-industry M&IE and regular M&IE may take effect only at the start of a new calendar year.

6. Monday, February 1, 2027: 2026 Form W-2 filing deadline (January 31 falls on a Sunday); nonaccountable allowances belong in wages.

7. Monday, March 15, 2027: 2026 S Corp (Form 1120-S) and partnership (Form 1065) returns due (or extend); Thursday, April 15, 2027: individual federal and NC returns due.

8. Thursday, September 30, 2027: the Notice 2026-60 rate period ends—watch for the IRS's next annual notice in September 2027.

What YCL can do

1. Travel policy template: draft or revise an accountable plan under Rev. Proc. 2019-48 and Notice 2026-60, including method choice, the October–December transition election, and substantiation/return deadlines.

2. Expense form and rate table setup: configure $329/$230 high-low rates and GSA fiscal 2027 locality rates for NC and your common destinations in QuickBooks, Xero or your expense app.

3. S Corp owner travel review: separate receipt-based lodging from M&IE per diem for owners with more than 10% so taxable amounts are not treated as tax-free allowances.

4. Payroll and W-2 handling: wage inclusion and withholding for flat-rate excess, year-end W-2 reconciliation and quarterly Form 941 filings.

5. Audit readiness: organize trip records (time, place, business purpose) and receipts, and represent you with the IRS under Form 2848.

6. Bilingual (EN/ZH) service with CPA Chenchen Liu and Gloria; offices in Cary (RTP) and Shanghai; Free Consultation.

FAQ

Q: What are the 2026–2027 high-low per diem rates in Notice 2026-60?

A: Notice 2026-60 sets the high-low rates for travel on or after October 1, 2026 at $329 per day for high-cost localities and $230 per day for other CONUS locations, with meal portions of $86 and $74. The transportation-industry M&IE rates are $80 CONUS and $86 OCONUS, and the incidental-expenses-only rate is $5 per day.

Q: Can an S Corp owner use the high-low per diem for their own travel?

A: Under Rev. Proc. 2019-48, an employee who owns more than 10% of the employer is a related party and cannot use a lodging per diem or the high-low method. Lodging must be reimbursed from actual receipts, while meals and incidentals may still be paid as an M&IE-only per diem.

Q: Do I have to switch to the new rates for October through December 2026?

A: Not necessarily. Rev. Proc. 2019-48 lets an employer keep the first-nine-month rates or adopt the new rates for the last three months of the year, as long as it applies the choice consistently to all employees and keeps the same method for each employee all year.

Q: What is the fiscal 2027 federal per diem rate for Raleigh, NC?

A: GSA's fiscal 2027 rate for Raleigh (Wake County), effective October 1, 2026 through September 30, 2027, is $142 per night for lodging and $74 per day for M&IE. Under the high-low method Raleigh is not a high-cost locality and uses the $230 daily rate.

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Disclaimer

This article is general tax information only and is not tax, legal or payroll advice for any person or business. It does not promise any tax result, penalty outcome or IRS position. Rates and rules are as published in IRS Notice 2026-60, Rev. Proc. 2019-48 and GSA data; application depends on your facts and company policy. Consult licensed tax and legal professionals for advice specific to you.