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Per diem (Latin for "per day" or "for each day") is a daily allowance for expenses, a specific amount of money that an organization gives an individual per day to cover living and traveling expenses (allowance) in connection with work done away from home or on tour. Per diem is also used as an adjective and an adverb.
Per diem pay eliminates the need for employees to spend as much time creating expense reports documenting the amount spent while traveling on business for reimbursement. Instead, employers pay employees a standard daily rate without regard to the amount actually spent by the employee. Employees do not have to give back any money if they did not use all of the per diem for travel expenses.
United States 
U.S. companies and organizations use the per diem rate guide published by the General Services Administration, which provides rates for a number of cities in the United States. When an employer reports an employee's earnings at the end of the year on a W-2, per diem is listed separately from taxable income, under 'Misc. non-taxable' if the company uses an accountable plan. Per diem payments made to employees under a non-accountable plan are included in Box 1 of the W-2 as taxable income. Please see IRS Pub. for instructions for Forms W-2 and W-3.
Per diem is understood to include the additional expenses incurred living away from home—basically having two residences. The GSA establishes per diem rates for hotels "based upon contractor-provided average daily rate (ADR) data of fire-safe properties in the local lodging industry."; this means that per diem varies depending on the location of the hotel—for instance, New York City has a higher rate than Gadsden, Alabama.
To qualify for per diem, work-related business activity generally requires an overnight stay. The IRS code does not specify a number of miles. However, based on case precedent and IRS rulings, it is commonly accepted that an overnight stay is required and actually occurs to justify payment of per diem allowance. The purpose of the per diem payment (or the deduction of expenses when inadequate reimbursements are provided) is to alleviate the burden on taxpayers whose business or employment travel creates duplicated expenses.
If the taxpayer anticipates employment away from home to last one year or less, then all the facts and circumstances are considered to determine whether such employment is "temporary". If the taxpayer anticipates employment to last (and it does in fact last) more than one year, the I.R.S. presumes that the employment is "indefinite". The taxpayer may rebut the presumption by demonstrating certain objective factors set forth in the revenue ruling. For employment with an anticipated or actual stay of two years or more, the I.R.S. holds that such employment is "indefinite", regardless of any other facts or circumstances.
Any tour of duty adding up to over 500 miles counts as a per diem. One can claim up to the per diem limit without receipts. Note also that as long as you keep a record of the amount spent and the date of the expense, then you do NOT need a receipt for any expense less than $75.
The US military pays its members per diem in accordance with the Joint Federal Travel Regulations. According to these regulations, the first and last days of travel are paid 75% of the daily General Services Administration rate, while all other days of travel receive the full rate. The JFTR also states that lodging taxes for CONUS and non foreign OCONUS are a reimbursable expense but requires a receipt. The JFTR also follows the 'expenses below $75 do not require a receipt' rule, although local disbursing officers may question charges they feel may be false.
The US Government also allows federal travelers to purchase a home at the temporary duty location and claim the allowable expenses of: mortgage interest, property taxes and utility costs actually incurred.
Per diem is also used in contracts to specify penalty accruals. Such wording would be found in reference to the expected closing date for a real estate contract, typically compensating a seller for a buyer's lack of expedience.
In addition, truck drivers have a special way of calculating a tax deduction for per diem. All drivers who are subject to USDOT hours of service are eligible. As of October 1, 2009, the per diem rate is $59 per day, and they may deduct 80% of this amount from their taxable income.
Per Diem Committee 
The Per Diem Committee establishes per diem rates for overseas US areas; e.g., Alaska, Hawaii, Guam, and other non-foreign locations - and also provides world-wide per diem rates (from GSA for CONUS and from State Department for foreign countries).
Hourly per diem calculation 
In occupations that pay an hourly wage, per diem is calculated as an hourly rate and paid in addition to the contractor's base pay.
The following example demonstrates the method for calculating hourly per diem rate assuming a 40-hour work week with consecutive weeks on site:
- Standard lodging: $80/day
- Standard meal: $20/day
- Per diem rate = (lodging + meal) * 7 days / 40 hours
- = $100/day * 7 days / 40 hours
- = $17.50 / hour
Some contract staffing companies pay contractors an all-inclusive rate in order to avoid the accounting complexity of per diem tax deductions. Thus, assuming a base salary pay of $55/hour for example, then the contractor's all inclusive pay rate is:
- Pre-tax Inclusive Rate = Base Rate + (Per diem Rate * Tax Bracket Factor)
- = $55/hour + ($17.50/hour * 1.33)
- = $78.28/hour
Per diem tax deductions are an effective tool for sheltering the client company from paying the additional costs of per diem out of pocket. Instead of transferring the per diem burden onto the government through a tax deduction, the burden is shifted back to the company, which in turn refuses to pay, which in turn means that the entire burden of per diem and maintaining a temporary second lodging away from home falls entirely on the contractor. Thus, the contractor's pay is reduced to:
- Base rate - Per diem eate
For example, at a base rate of $55/hour and a per diem rate of $17.50, the contractor's rate becomes:
- $55/hour − $17.50/hour = $37.50/hour
See also 
- Attendance allowance
- Business Mileage Reimbursement Rate (USA)
- United Kingdom parliamentary expenses scandal
- "Per Diem Rates Overview", US GSA
- "Frequently Asked Questions, Per Diem", GSA
- GSA per diem FAQ
- GSA: Per Diem Rates
- Commissioner v. Flowers, 326 US 465
- How much per diem are you allowed without receipts?; "Frequently Asked Questions, Per Diem", GSA
- Chap 4; section a; Joint Federal Travel Regulations
- Chap 4 Joint Federal Travel Regulations
- GSA - Domestic Per Diem Rates
- Search Domestic and Foreign Per Diem Rates
- IRS Publication 463 (2006), Travel, Entertainment, Gift, and Car Expenses
- U.S. Department of Defense - Per Diem, Travel and Transportation Allowance Committee
- iPhone/iPad Per Diem App for Pilots and Flight Attendants
- Per Diem Calculation for Pilots and Flight Attendants