---
title: "Travel, meals and mileage: what is reimbursable and what is deductible"
description: "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."
canonical: "https://lopifi.com/learn/travel-meals-mileage-and-deductions"
---

# 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.

Source: https://lopifi.com/learn/travel-meals-mileage-and-deductions
Part of: Lopifi — Planned: US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

**How do mileage, per diem and the 50 percent meals rule work for a startup?** 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](https://lopifi.com/md/glossary/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.

| Trips from | Trips through | Cents a mile |
| --- | --- | --- |
| January 1, 2026 | June 30, 2026 | 72.5 |
| July 1, 2026 | December 31, 2026 | 76 |

The 2026 business rates, in cents a mile.

> “Self-employed and business: 76 cents/mile”

— [IRS, Standard mileage rates, 2026 (July 1 – Dec. 31), IR-2026-29](https://www.irs.gov/tax-professionals/standard-mileage-rates), The business standard mileage rate, with the earlier rates in the same table

| Date | Purpose | Miles | Cents a mile | Amount |
| --- | --- | --- | --- | --- |
| October 8, 2026 | Supplier visit | 96 | 76 | $72.96 |
| October 22, 2026 | Customer sites | 140 | 76 | $106.40 |
| November 12, 2026 | Bank and post office | 58 | 76 | $44.08 |
| Total |  | 294 |  | $223.44 |

Three October and November trips by the operations manager, at the rate in force on each date.

**Use case — A claim across a rate change (not Northwind).** Northwind's books start in September 2026, so a claim that straddles a change has to come from another year. In 2022 the IRS raised the rate on July 1. An employee who drove 100 miles on June 30 and 100 on July 1 and files both together on July 5 is owed $121, not the $125 that pricing both at the filing-date rate would give. The date of the trip decides, trip by trip.

> **Tip.** Keep the rate table with effective dates in the expense system, and let the trip date choose the rate. Typing the current rate into a spreadsheet works until the year the rate changes in July.

> **Tip.** Ask for a log, not a total: date, where from and where to, miles and the purpose. An app that records trips is the easiest log to keep, and the amount reimbursed is the rate times the logged miles.

> **Watch for.** Commuting. Driving from home to the employee's regular workplace is personal however far it is, and a reimbursement for it is wages. The log's purpose column is where it gets caught.

## Per diem

A [per diem](https://lopifi.com/md/glossary/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.

— [IRS Publication 463, Travel, Gift, and Car Expenses (2025)](https://www.irs.gov/publications/p463), Reimbursements, per diem, the 50% limit on meals and accountable plans

**Per diem**
- Pro: No receipts for each coffee
- Pro: A predictable cost per trip day
- Con: The rate is by place and date and has to be looked up
- Con: Lodging is usually still reimbursed on receipts
- Best for: Frequent travelers, and trips where receipts for small meals are a nuisance

**Actual cost**
- Pro: Pays what the trip actually cost
- Pro: Nothing to look up
- Con: Every receipt has to be collected and coded
- Con: People spend what they are allowed
- Best for: Occasional travel, and any place where costs run well above the federal rate

Per diem or actual cost.

## 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.

> “shall not exceed 50 percent of the amount of such expense which would (but for this paragraph) be allowable as a deduction under this chapter”

— [IRC §274(n)(1)](https://www.law.cornell.edu/uscode/text/26/274), Food and beverages: half the expense is deductible

> “With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation”

— [IRC §274(a)(1)(A)](https://www.law.cornell.edu/uscode/text/26/274), Entertainment, amusement and recreation are not deductible

> “to the extent that such expense, when added to prior expenses of the taxpayer for gifts made to such individual during the same taxable year, exceeds $25”

— [IRC §274(b)(1)](https://www.law.cornell.edu/uscode/text/26/274), Business gifts: $25 a year to any one person

| Expense | Kind | Paid | Deductible | Disallowed |
| --- | --- | --- | --- | --- |
| Dinner with a customer | Business meal | $142.60 | $71.30 | $71.30 |
| Hotel, trade show | Ordinary expense | $289 | $289 | $0 |
| Concert tickets for a customer | Entertainment | $210 | $0 | $210 |
| Gift basket for a customer | Gift | $60 | $25 | $35 |
| Second gift, same customer | Gift | $30 | $0 | $30 |
| Conference registration | Ordinary expense | $695 | $695 | $0 |
| Total |  | $1,426.60 | $1,080.30 | $346.30 |

Six expenses from the year, all substantiated. Paid is not the same as deductible.

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.

> **Tip.** Keep separate accounts for business meals, client entertainment and gifts. At year end the preparer takes a balance, applies the rule and moves on, instead of reading a year of memo lines.

> **Tip.** Write the guest and the purpose on the receipt the day of the meal, and make it a required field in the expense tool. The substantiation rules ask for exactly those facts, and nobody remembers them in a month.

> **Tip.** Track gifts per recipient, not per month. The limit is per person per year, and a second small gift to the same person is where the cap quietly runs out.

> **Mistake.** Coding concert tickets or a golf day as "client meals" or "marketing" to get a deduction. Entertainment is entertainment whatever the account is called, and an account name that does not match the receipt is what an examiner notices first.

> **Watch for.** Food and events for employees, such as office snacks or a team party, follow their own rules inside section 274 and are not covered by the table above. Ask your preparer before you assume either full deduction or none.

> **Reimbursing an expense and deducting it are two decisions, and only the first one is yours.**

**Scenario — Challenge: what is deductible?.** Six expenses are on the table above with the deductible column blank: a customer dinner, a hotel, concert tickets, two gifts to the same customer, and a conference registration. Write what the Code lets Northwind deduct on each, remembering that the second gift is added to the first.

**Exercise — What is deductible?.** Six expenses from the year, all substantiated. Write what the Code lets Northwind deduct on each: an ordinary expense in full, a business meal at half, entertainment not at all, and a gift only up to the annual limit for that person, counting what was already given. Type it in the workbook at https://lopifi.com/playground.

## Where this lesson's rules come from

- [IRS, Standard mileage rates, 2026 (July 1 – Dec. 31), IR-2026-29](https://www.irs.gov/tax-professionals/standard-mileage-rates) — The business standard mileage rate, with the earlier rates in the same table (irs)
- [IRC §274(n)(1)](https://www.law.cornell.edu/uscode/text/26/274) — Food and beverages: half the expense is deductible (statute)
- [IRC §274(a)(1)(A)](https://www.law.cornell.edu/uscode/text/26/274) — Entertainment, amusement and recreation are not deductible (statute)
- [IRC §274(b)(1)](https://www.law.cornell.edu/uscode/text/26/274) — Business gifts: $25 a year to any one person (statute)
- [IRC §274(d)](https://www.law.cornell.edu/uscode/text/26/274) — Substantiation: amount, time and place, business purpose and business relationship (statute)
- [IRS Publication 463, Travel, Gift, and Car Expenses (2025)](https://www.irs.gov/publications/p463) — Reimbursements, per diem, the 50% limit on meals and accountable plans (irs)

## Read further

- https://lopifi.com/md/startups/employee-expense-reimbursements
- https://lopifi.com/md/docs/domain/procure-to-pay
- https://lopifi.com/md/docs/domain/lexicon

- **Track:** [Accounts payable](https://lopifi.com/md/learn/ap)
- **Lesson:** Lesson 18 of 21 — 11 min
- **Terms taught:** [Standard mileage rate](https://lopifi.com/md/glossary/standard-mileage-rate), [Per diem](https://lopifi.com/md/glossary/per-diem), [Accountable plan](https://lopifi.com/md/glossary/accountable-plan), [Reimbursement](https://lopifi.com/md/glossary/reimbursement), [Expense](https://lopifi.com/md/glossary/expense)
- **Previous:** [Accountable plans: when a reimbursement is not wages, AP · Lesson 17](https://lopifi.com/md/learn/accountable-plans-and-reimbursements)
- **Next:** [Capitalize or expense: equipment, freight and the small-purchase rules, AP · Lesson 19](https://lopifi.com/md/learn/capitalize-or-expense-purchases)
- **The course:** https://lopifi.com/md/learn