Can Self-Employed Claim Per Diem Deductions?

March, 25 2025 by Steve Banner, EA, MBA

Before we get started, let us clarify what we mean by the term “per diem.” In general terms, “per diem” is a daily allowance given to employees or self-employed contractors to cover travel expenses such as lodging, meals, and incidental costs when they are away from their usual place of work.

Coming back to the original question of whether you can claim per diem if you are self-employed and traveling, the answer is yes. Self-employed taxpayers can claim per diem deductions for business travel, provided that the circumstances of their travel meet certain conditions. In short, a given business trip can qualify for the per diem deduction if the destination of the trip is a location away from the taxpayer’s tax home, and the trip is for a legitimate business purpose.

 

What Is A Tax Home?

Generally speaking, a self-employed taxpayer’s tax home is the city or general area where their main place of work or business is located. Taxpayers are considered to be traveling away from home if their duties require them to be away from the general area of their tax home for a period substantially longer than an ordinary day's work, and they need to get sleep or rest to meet the demands of their work while away. For taxpayers who regularly work in more than one place, their tax home is the general area where their main place of business or work is located.

Example 1: Joel’s consultancy business is based in San Diego, which is where he works most of the time. However, he is currently working temporarily on a project in San Francisco where he stays in a hotel and eats in restaurants. Joel’s tax home is regarded as San Diego because this is the location where his business is based, and where he performs the majority of his work. However, because his current work is away from his tax home, Joel may be able to claim per diem for his expenses in San Francisco.

 

How Much Is the Per Diem Deduction?

The per diem allowance is intended to cover lodging, meals, and incidental expenses for employees who are traveling away from home on business. This lump-sum allowance varies in amount from one city or region to the next, according to rates set and updated regularly by the U.S. General Services Administration. (See https://www.gsa.gov/travel/plan-book/per-diem-rates). The per diem allowance consists of two parts:
 

• Daily Lodging rate, and
• Meals and Incidental Expenses (M&IE) rate.

Taxpayers who are employees have the option of tabulating and receiving reimbursement for their actual daily expenses but, in a more practical sense, it is simpler for them to claim the per diem allowance instead. From the employer’s point of view, the per diem allowance helps simplify the process of reimbursing travel expenses and provides workers with the funds needed to cover their daily costs.

On the other hand, the situation is slightly different for self-employed taxpayers. They cannot use the Daily Lodging rate described above and must instead claim their actual expenses for lodging. When it comes to meals and other incidentals, they can either claim their actual expenses or claim what is known as the standard meal allowance. The amount of the standard meal allowance for their work location can be determined by using the federal Meals and Incidental Expenses (M&IE) rate found on the General Services Administration's website at GSA.gov/travel/plan-book/per-diem-rates/mie-breakdown. Using the standard meal allowance means that the self-employed taxpayer no longer needs to keep records of their actual meal expenses, but records do need to be kept of the time, place, and business purpose of their travel. As a reminder, the standard meal allowance also includes “incidental expenses” which are defined as fees and tips given to porters, baggage carriers, and hotel staff.

Example 2: Referring to our earlier example, our self-employed consultant Joel worked Tuesday through Thursday during the last week of February 2025 in San Francisco. According to the General Services Administration website (see above), these are the per diem rates that applied to San Francisco for the month of February 2025:
 

• Daily lodging rate - $259
• Meals and incidental rate - $92

When recording his allowable deduction for these 3 days away from his tax home, Joel will be able to claim a deduction for the Meals and Incidentals rate for each day (3 x $92 =) $276, as well as the actual amounts he paid for his hotel accommodation for the 3 nights.

 

Documentation and Record Keeping

Proper documentation is crucial for self-employed taxpayers to substantiate their per diem expenses. This may include:
 

• Receipts for lodging, meals, and incidental expenses.
• Travel itineraries and business purpose statements.
• Records of dates, locations, and duration of travel.

Keeping accurate records ensures compliance with IRS regulations and helps avoid potential tax issues that may arise if the IRS ever disallows a deduction or audits a taxpayer’s return.