Travel, meals and mileage: what is reimbursable and what is deductible
How to reimburse mileage at the rate in force on the trip date, what a per diem is, and how the meals, entertainment and gift rules cut the deduction.
Two questions follow every travel and meal expense, and founders conflate them. The first: will the company reimburse it, and how much? That is the policy, and under an accountable plan it can be reimbursed tax-free. The second: does the Code let the company deduct it? That is not up to the policy. A company can reimburse a concert ticket and still not deduct it.
Mileage
For an employee driving their own car, most companies reimburse at the IRS business standard mileage rate. It is dated: the trip date picks the rate, not the day the claim is entered. In 2026 the IRS moved the rate partway through the year.
Mileage, October and November
| Account | Debit | Credit |
|---|---|---|
| Travel expense, mileage | 223.44 | |
| Reimbursements payable | 223.44 | |
| Balanced | 223.44 | 223.44 |
The claim, approved. Each trip is rounded once, so the lines add to the total.
Per diem
A per diem pays a fixed daily amount for lodging, meals and incidentals in place of reimbursing each receipt. The federal rates are published by place and date by the General Services Administration, and IRS Publication 463 explains how an allowance within the federal rate is treated as substantiating the amount. The time, place and business purpose of the trip still have to be recorded. The meals part of a per diem is still food and beverages, so the 50 percent limit below still applies to it.
Per diem
- Good at
- No receipts for each coffee
- A predictable cost per trip day
- Watch for
- The rate is by place and date and has to be looked up
- Lodging is usually still reimbursed on receipts
- Best for
- Frequent travelers, and trips where receipts for small meals are a nuisance
Actual cost
- Good at
- Pays what the trip actually cost
- Nothing to look up
- Watch for
- Every receipt has to be collected and coded
- People spend what they are allowed
- Best for
- Occasional travel, and any place where costs run well above the federal rate
Meals, entertainment and gifts
Three rules in IRC section 274 cut the deduction for spend that is perfectly legitimate to reimburse. Food and beverages are limited to 50 percent of the expense. Entertainment, amusement and recreation are not deductible at all. A gift to one person is deductible only up to $25 a year. Separately, section 274(d) requires substantiation of travel and gifts, which is why the guest and the purpose go on the receipt.
The books record the full cost of all six. The limits are applied on the tax return, as a difference between book and tax that never reverses, which is why the accounts matter: a bookkeeper who keeps meals, entertainment and gifts in their own accounts hands the preparer the answer.
Reimbursing an expense and deducting it are two decisions, and only the first one is yours.
Finished this lesson?
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Anything marked as a convention is ours, not the rule-maker's.
- Federal statute
- IRC §274(n)(1) (opens in a new tab)Food and beverages: half the expense is deductibleFree to read
- IRC §274(a)(1)(A) (opens in a new tab)Entertainment, amusement and recreation are not deductibleFree to read
- IRC §274(b)(1) (opens in a new tab)Business gifts: $25 a year to any one personFree to read
- IRC §274(d) (opens in a new tab)Substantiation: amount, time and place, business purpose and business relationshipFree to read
- IRS guidance
- IRS, Standard mileage rates, 2026 (July 1 – Dec. 31), IR-2026-29 (opens in a new tab)The business standard mileage rate, with the earlier rates in the same tableFree to read
- IRS Publication 463, Travel, Gift, and Car Expenses (2025) (opens in a new tab)Reimbursements, per diem, the 50% limit on meals and accountable plansFree to read
The words this lesson teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- Standard mileage rateThe cents-per-mile figure the IRS publishes for business use of a car, which an employer may use to reimburse mileage. It is dated: the trip date picks the rate, not the day the claim is entered
- Per diemA fixed daily allowance paid for lodging, meals and incidental expenses in place of reimbursing actual cost. Within the federal rate for the place and date it substantiates the amount of the expense under an accountable plan; time, place and business purpose still need recording
- Accountable planAn employer reimbursement arrangement under which an employee's business expense reimbursements are not wages: the expense has a business connection, the employee adequately accounts for it within a reasonable time, and any excess is returned within a reasonable time. Fail one test and the reimbursement is taxable wages
- ReimbursementRepaying an employee for a business cost they paid personally. Until paid it is owed to the employee, not to a vendor; whether it is tax-free depends on the employer's accountable plan
- ExpenseOutflows or other using up of assets, or incurrences of liabilities, from delivering or producing goods, rendering services or carrying out other activities — recognized when incurred, not when paid
See also
- Procure to pay (AP)The payables stack from requisition to reconciliation: requisition → PO → receipt → bill → approval → payment → reconciliation.
- LexiconOne word per concept, used the same way in code, UI copy, and docs. Call one thing by two names and the accountants using your product notice first, then stop trusting the numbers.
- Employee expense reimbursements and accountable plansHow to reimburse employees tax-free under an IRS accountable plan: business purpose, timely receipts, excess returned, mileage and sales tax on receipts.
- ExpenseCaptureCamera-first, policy violations shown at entry.
- ExpenseTrackerSpend by category on three bases, with polarity derived per row.
- ReceiptSheetPrintable/shareable receipt.