Options for Managing Travel Expenses in 2025

12/13/2024

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As a construction company owner or manager in the greater New York area, managing business travel expenses effectively can significantly impact your bottom line. Let's break down the key points you need to know, including a comparison of itemized deductions versus per diem rates.
 

What's New for 2025?

The IRS has updated its per diem rates for the 2024-2025 fiscal year, effective October 1, 2024. Key updates include:

• Transportation Industry Rates: $80 per day for travel within the continental U.S. and $86 for travel outside
• High-Cost Localities: $319 per day, with $86 allocated for meals
• Other Localities: $225 per day, with $74 for meals

 

What Counts as a Business Travel Expense?

For construction companies, typical business travel expenses include transportation to job sites, lodging for extended projects, meals during business trips, and incidental expenses like tips or laundry
 

Itemized Deductions vs. Per Diem Rates

 
Itemized Deductions:

• Requires keeping detailed receipts and records for each expense
• Allows for deduction of actual costs incurred
• More time-consuming for record-keeping and tax preparation
• May result in higher deductions if actual expenses exceed per diem rates

 
Per Diem Rates:

• Simplifies expense tracking and bookkeeping
• No need to keep receipts for meals and incidentals
• Easier tax preparation and reduced paperwork
• May result in lower deductions if actual expenses are higher than per diem rates

 

Key Considerations

• Lodging expenses must be substantiated with receipts, even when using per diem rates for meals and incidentals.
• Only 50% of meal expenses are typically deductible, whether using actual costs or per diem rates.
• For self-employed individuals, per diem rates can't be used for lodging expenses, only for meals and incidentals

Maximizing Your Deductions

Remember, while you can deduct 100% of lodging expenses within per diem limits, meal deductions are generally limited to 50%. Keep this in mind when budgeting for projects or estimating job costs.
 

Stay Compliant, Stay Profitable

Using per diem rates correctly isn't just about maximizing deductions – it's about staying on the right side of IRS regulations. By keeping up with these changes and implementing them in your business practices, you're setting your construction company up for financial success.
 
Need help figuring out which method is best for your specific situation? We're here to help! Our team specializes in accounting for construction companies in the greater New York area. Let's work together to ensure your travel expense management is as solid as the structures you build.