100% deduction for trucker per diem in COVID-19 Pandemic Relief Package confirmed by the IRS in Notice 2021-63 (12/6/2021)

[Update: The temporary 100% deduction for per diem expired on December 31, 2022]

Full Deduction for Business Meals

Congress used a single line on page 4871 of the Consolidated Appropriations Act, 2021 (CAA) to allow the full deduction for per diem. Section 210 of the act temporarily raised the allowance of business meals (for food or beverages provided by a restaurant) under IRC § 274(n) to 100% from 50% for tax years 2021 and 2022.

The IRS issued Notice 2021-25 on April 8, 2021 (updated by Notice 2021-63 on December 6, 2021) that explains when the temporary 100-percent deduction applies and when the 50-percent limitation continues to apply for purposes of § 274 of the Internal Revenue Code (Code), as amended by § 210 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Act), enacted as Division EE of the Consolidated Appropriations Act, 2021, Pub. L. No. 116- 260, 134 Stat. 1182 (December 27, 2020)

The IRS previously allowed motor carriers and self-employed truckers using the Special Transportation Industry per diem to deduct business meals at 80% under 274(n)(3). Unfortunately, Congress omitted any commentary on the interplay of 274(n)(1) and (3) in the CAA. On April 9, 2021, I called the Office of Associate Chief Counsel (Income Tax & Accounting) and obtained confirmation the temporary 100-percent deduction for business meal expenses applied to the transportation industry as well. The Associate Chief Counsel's opinion was affirmed by issuance of IRS Notice 2021-63 on December 6, 2021.

"Absolutely yes, we tried to allow as many taxpayers to use it as possible"

Deena Devereux, IRS Office of Associate Chief Counsel

Introducing Per Diem Plus Small Fleets, an affordable, customizable per diem solution for solo and team operators

Internal Revenue Code Section 274

26 U.S. Code § 274 - Disallowance of certain entertainment, etc., has been revised as follows (as modified by the CAA):

(n) 100 percent of meal expenses allowed as deduction

(1) In general:

The amount allowable as a deduction under this chapter for any expense for food or beverages shall not exceed 100 percent of the amount of such expense which would (but for this paragraph) be allowable as a deduction under this chapter.

(2) Exceptions

Paragraph (1) shall not apply to any expense if—

(A) such expense is described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e),

(B) in the case of an employer who pays or reimburses moving expenses of an employee, such expenses are includible in the income of the employee under section 82, or

(C) such expense is for food or beverages— (i) required by any Federal law to be provided to crew members of a commercial vessel,(ii) provided to crew members of a commercial vessel.

(D) such expense is—
(i) for food or beverages provided by a restaurant, and
(ii) paid or incurred before January 1, 2023.

(3) Special rule for individuals subject to Federal hours of service (superseded by CAA)

In the case of any expenses for food or beverages consumed while away from home (within the meaning of section 162(a)(2)) by an individual during, or incident to, the period of duty subject to the hours of service limitations of the Department of Transportation, paragraph (1) shall be applied by substituting “80 percent” for “50 percent”

Examples

Motor Carrier: A motor carrier with an effective Federal tax rate of 10% paying trucker per diem to a driver who is away from home an average 280 nights per year will save with the full deduction for per diem an additional $370 per year in 2021 and 2022.

• Fleet per diem savings per driver 2020: $2,694
• Fleet per diem savings per driver 2021 & 2022: $3,064

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 dieman additional $665 per year in 2021 and 2022.

• Owner operator savings 2020: $2,393
• Owner operator savings 2021 & 2022: $3,064

Use our Fleet Per Diem Benefit Calculator to learn how much your fleet can save with Per Diem Plus Fleets

Per Diem Plus FLEETS is a configurable mobile application enterprise platform that automates administration of an IRS-compliant accountable per diem plan for truck drivers and fleets managers. No matter how big or small your company is, Per Diem Plus has a solution for you.

About Per Diem Plus

The Per Diem Plus^® is the only IRS-compliant mobile application that provides automatic trucker per diem and travel-related expense tracking for drivers, motor carriers and owner operators. Per Diem Plus was designed, developed and is managed in the USA.

About the Author

Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.

In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA

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Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.