Per Diem

Understanding Per Diem in Trucking

Per diem in trucking refers to a daily, non-taxable allowance for meals and incidental expenses (M&IE) that drivers receive or claim when away from their tax home overnight under hours-of-service regulations. This fixed daily reimbursement eliminates the need to track actual meal receipts and provides significant tax advantages for both drivers and carriers.

Current IRS Transportation Per Diem Rates

The IRS sets special transportation industry per diem rates annually under Notice 2024-68. For the period from October 1, 2024 through September 30, 2025, the rates are:

• Continental U.S. (CONUS): $80 per full day
• Outside Continental U.S. (OCONUS): $86 per full day
• Partial days: 75% of the full-day rate ($60 CONUS, $64.50 OCONUS)

These rates represent a significant increase from the previous period (January-September 2024) when CONUS rates were $69 per day. Transportation workers can only deduct 80% of these amounts for tax purposes, making the effective deductible rate $64 per day for CONUS travel.

Eligibility Requirements

To qualify for transportation per diem, drivers must meet specific criteria established by the IRS and FMCSA regulations:

• Must be subject to DOT hours-of-service rules
• Must be away from tax home overnight (substantially longer than a regular workday)
• Must have an established tax home (regular business location)
• Must maintain proper documentation through logs or ELD systems

Local drivers who return home daily typically do not qualify for per diem allowances, as they don't meet the overnight away-from-home requirement.

Company Driver vs. Owner-Operator Differences

The Tax Cuts and Jobs Act (TCJA) created significant differences in how per diem is handled between employee drivers and independent contractors:

Company Drivers (W-2 employees): Cannot claim per diem deductions on their personal tax returns but can receive per diem from carriers as non-taxable reimbursement under accountable plans. This reduces taxable wages while maintaining take-home pay levels.

Owner-Operators (1099 contractors): Can claim transportation per diem deductions on their business tax returns, subject to the 80% deductibility rule. They must track days away from home and apply current IRS rates to calculate their deduction.

Accountable Plan Requirements

For carriers to provide tax-free per diem to drivers, they must establish compliant accountable plans under IRC Section 62(c). These plans require:

• Business connection: Payments must relate to deductible travel expenses
• Substantiation: Drivers must document time, place, and business purpose
• Return of excess: Overpayments must be returned or treated as taxable wages

Failure to maintain compliant accountable plans can result in IRS reclassification of all per diem as taxable wages, creating significant back-tax liability for carriers.

Impact on Benefits and Social Security

While per diem increases take-home pay, it's important to understand its impact on future benefits. Since per diem is not considered wages, it doesn't count toward:

• Social Security average indexed earnings calculations
• Workers' compensation wage bases
• Unemployment benefit calculations
• 401(k) contribution limits (plan-dependent)

Drivers should balance the immediate tax benefits of per diem against potential reductions in future benefit calculations.

Practical Implementation

Most trucking companies structure per diem programs by paying a portion of driver compensation as non-taxable per diem reimbursement and the remainder as taxable wages. Common approaches include:

• Fixed daily per diem rates for days away from home
• Per-mile per diem components built into pay packages
• Percentage-based allocations between wages and per diem

Documentation typically relies on driver logs or electronic logging devices to track days away from home, eliminating the need for meal receipt collection.

Industry Statistics and Trends

According to industry surveys, approximately 75% of major trucking companies offer per diem programs to their drivers. The average per diem payment ranges from $50-70 per day, though many companies now align with the full IRS rate of $80 per day for competitive advantage.

The trucking industry processes over $800 billion in freight annually, with long-haul drivers spending an average of 240 days per year away from home. This translates to significant per diem benefits, with eligible drivers potentially claiming $19,200 annually in per diem allowances at current rates.

Compliance and Record Keeping

Proper documentation is crucial for per diem compliance. Drivers and carriers must maintain records showing:

• Dates and locations of travel
• Business purpose of trips
• Days away from tax home
• Distinction between full and partial days

Electronic logging devices have simplified this process by automatically tracking driver locations and duty status, providing the necessary documentation for per diem substantiation.

Future Outlook

The IRS typically updates transportation per diem rates annually, effective October 1st each year. Rates are generally indexed to inflation and cost-of-living changes. The TCJA provisions limiting employee deductions are scheduled to expire after 2025, which may affect how per diem is structured in the future.

As the trucking industry continues to face driver shortages, per diem programs remain a valuable tool for carriers to improve driver compensation packages while managing payroll tax obligations. The trend toward higher per diem rates and more comprehensive programs is expected to continue as competition for qualified CDL drivers intensifies.