Per diem is the term used for tax-deductible travel expenses that employees and self-employed workers are allowed when working away from home. Approved expenses include those spent on housing, meals and other incidentals such as tips, travel expenses and mailing costs that are associated with conducting the business at hand. The authorized per diem limits are established by the General Services Administration under the United States Federal Government, and these limits vary between different cities. In order to be considered per diem, the expenses must occur at least 50 miles from your home and include at least one overnight stay.
Look up the per diem limits for each of your travel expenses and take note of them. You can only claim up to the limit amount on your taxes. If any of your receipts go over the limit amount, you'll need to use the limit amount in lieu of the actual receipt amount. The limits established for each city can be found on the IRS website under Publication 1542, and also on the United States General Services Administrations website through their search box.
Obtain your tax forms from the IRS website. At a minimum, you'll need Form 1040, Schedule A, and Form 2106. You can fill them out online, or you can print them and fill them out by hand.
Fill out Form 2106. The first part of the form has three steps. These include entering your allotted business expenses, deducting any expenses already reimbursed by your employer, and calculating the amounts you can deduct on your Schedule A. In the second part of the form, calculate your vehicle expenses. This includes expenses for personal vehicles used for business, company vehicles and rental vehicles.
Itemize your deductions on the Schedule A form. Fill out this form as normal, but pay particular attention to the section titled "Job Expenses and Certain Miscellaneous Deductions" for your per diem deductions. Take the figure you calculated for line 10 on Form 2106 and write that on line 21 on the Schedule A form.
Fill out Form 1040. Fill out the first four sections covering your personal information, filing status, exemptions, income and adjusted gross income as normal. Pay particular attention to line 40 under the "Tax and Credits" section for claiming your per diem deductions. Take the figure you calculated for line 29 on the Schedule A form and write that figure on line 40 on your 1040. Complete the rest of the form as normal.
Print, sign and mail your completed tax forms to the IRS.
- U.S. General Services Administration: Frequently Asked Questions, Per Diem
- IRS: Publication 15 - Main Content
- Internal Revenue Service: Publication 1542 - Main Content
- U.S. General Services Administration: Per Diem Rates Lookup
- Internal Revenue Service: Form 1040
- Internal Revenue Service: Schedule A
- Internal Revenue Service: Form 2106