01/06/2022
Temporary 100% Deduction for Meal Portion of Per Diem Reimbursement
Motor carriers whose drivers are subject to the hours of service requirements can temporarily deduct the meal portion of the per diem expense at 100% instead of 80% for 2021 and 2022. This temporary relief was made available by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, a division of the Consolidated Appropriations Act, 2021 (CAA 2021). Initially there was some confusion on whether the transportation industry using per diem reimbursements could take advantage of this tax relief, but the IRS clarified the confusion with Notice 2021-63, “Temporary 100-Percent Deduction Applies to Meal Portion of 2021 and 2022 Per Diem Rate or Allowance.”
Normally, motor carriers and self-employed drivers must substantiate the expenses pursuant to 26 U.S. Code §274(d). Rev. Proc. 2019-48, which provides the rules for taxpayers that choose to use a per diem rate and requires taxpayers to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Traveling away from home requires that 1) your duties require you to be away from the general area of your tax home substantially longer than an ordinary day’s work and 2) you need to sleep or rest to meet the demands of your work while away from home. The sleep or rest is defined as substantial sleep which would be more than a break or a few hours at your turnaround point. Taxpayers who normally follow the rules in Rev. Proc. 2019-48 are deemed to have met the substantiation requirements. Notice 2021-63 set forth a special rule that a taxpayer who properly applies the rules of Rev. Proc. 2019-48 may treat the meal portion of the per diem as being attributable to food and beverages provided by a restaurant.
What this means for the motor carrier is that for 2021 and 2022 the meal expense portion of providing the Special Transportation Industry per diem is fully, 100% deductible without the hassle of having to demonstrate that the meals were in fact purchased from a restaurant. For the owner-operator that uses the Special Transportation Industry per diem expense, you get to claim 100% of meal portion of the per diem as a tax deduction for each day you are away from your tax home. It is expected that the per diem deduction will return to 80% beginning in 2023 when the current temporary relief expires, unless Congress passes further relief legislation.
For Example:
Owner Operator: An independent owner operator operating one-truck with an effective Federal tax rate of 18% claiming trucker per diem and averaging 280 nights away from home per year will save with the full deduction for per diem an additional $665 per year in 2021 and 2022.
Owner operator savings 2020: $2,393
Owner operator savings 2021 & 2022: $3,064
