Compliant Per Diem Programs in Trucking

What is Per Diem?

Implementing a compliant trucking per diem program typically has 7 or 8 figure implications to carriers in terms of tax savings and risk mitigation – while allowing carriers to stay competitive in the driver recruitment market.

Per diem in trucking is a daily, tax-favored allowance that covers a driver’s meals and incidental expenses when they are away from home overnight for work, instead of reimbursing or deducting actual receipts.

Per diem literally means “per day” and, in trucking, it is tied to meals and incidental expenses (M&IE), not lodging. It applies when a driver is working away from their tax home and required to take rest breaks or overnights away from home.

The IRS publishes special transportation-industry per diem rates that set the maximum tax-free amount carriers can pay (or drivers can deduct, if eligible) without itemized receipts.

The transportation-industry rate is currently 80 dollars per full day within the continental U.S., and 86 dollars per day outside the continental U.S. (effective for 2025 and carried into 2026 beginning October 1, 2025).

Drivers generally can deduct 80% of the M&IE per diem amount on taxes; for an 80-dollar CONUS rate, the deductible portion is 64 dollars per full day.

The transportation-industry rate is currently 80 dollars per full day within the continental U.S. Drivers generally can deduct 80% of the M&IE per diem amount on taxes; for an 80-dollar CONUS rate, the deductible portion is 64 dollars per full day. Partial days typically use a reduced percentage of the full-day rate (e.g., 75%), so the allowed amount is lower on departure and return days.

Why implement a compliant per diem program as a carrier?

• Payroll tax savings: Because the per diem portion is not subject to employer FICA and some state payroll taxes, carriers pay less in payroll tax per mile or per day than if all pay were taxable wages.
• Competitive recruiting and retention: Advertising higher net pay via per diem can make a fleet more attractive versus carriers that pay the same gross but do not offer a per diem program.
• Cleaner, standardized process: A formal per diem program replaces ad‑hoc reimbursements and receipt processing with a uniform daily or mileage-based policy, which simplifies administration.
• Shared tax benefit story: Properly structured, per diem lets the carrier and drivers “split” the tax efficiency—drivers get higher net pay; carriers save on payroll taxes and can position that as part of a total‑comp package.

Why is per diem advantageous for drivers?

• Higher take‑home pay today: Because per diem is not subject to income tax or FICA, drivers usually see more net pay each week than with the same gross pay and no per diem.
• Simpler expense handling: Instead of saving every meal receipt, drivers rely on a fixed daily allowance that’s deemed to cover meals and incidentals, which simplifies record‑keeping.
• Predictable reimbursement: A set per‑day (or per‑mile) amount gives drivers a consistent expectation of how much they’ll have available on the road for food and small expenses.
• Tax admin offloaded to the carrier: When the company structures per diem through payroll, it usually takes on the tracking and audit risk, so the driver has fewer tax-filing headaches.

What’s the cost of getting per diem wrong?

Getting per diem wrong can be material, particularly in an audit.

Tax and IRS consequences of a non-compliant program

• Back taxes and penalties: If the IRS decides your plan is non‑compliant (for example, per diem paid on non‑qualifying local runs or flat per diem every day regardless of travel), it can reclassify all per diem as taxable wages and assess back income tax, FICA, and penalties.
• Large audit exposure per driver: Industry estimates put typical IRS exposure for a bad program around 3,000 dollars per qualifying driver per year with up to a three‑year lookback, so a 200‑driver fleet could be staring at a low seven‑figure assessment.​
• Nonaccountable vs accountable plan: If your plan fails the accountable‑plan tests (no real business connection to travel days, no tracking of qualifying days, or excessive amounts), all per diem must be treated as taxable wages, retroactively if the IRS audits.
• Individual driver exposure: If a fleet or driver tries to claim per diem or deductions without documentation or where the employer already reimbursed them, the Tax Court has disallowed the deduction entirely.​

“We would not rollout our per diem program without Fleetflo.” – Transport Topics Top 100 Carrier

Payroll, insurance, and wage-law issues of a noncompliant per diem program

• Workers’ comp and unemployment insurance: If per diem is excluded or reported incorrectly in payroll systems, a workers’ comp auditor can disallow your treatment and recalculate premium on higher “true” wages, causing sudden premium bills or disputes.​
• Wage and hour risk: Overuse of per diem to depress taxable CPM can invite scrutiny around minimum wage or overtime calculations if regulatory bodies argue that some or all per diem should count as wages for those tests.
• Mischaracterized income: Abusive or sloppily designed programs can mischaracterize hundreds of thousands of dollars of wages as non‑taxable per diem. We commonly see programs with millions of dollars of mischaracterized income.

How do I stay compliant while running a fully contributed per diem program?

• Audit trail: Maintain synchronized dispatch records, ELD logs, trip sheets, and payroll detail showing date, location, and duty status for every day per diem is paid to prove “away from home” days in an audit. Ideally this work is performed monthly and demonstrates a clear report for simple hassle-free audit-readiness.
• Accountable plan: Tie per diem only to legitimate qualified travel and treat any amount above IRS limits as taxable wages.
• Qualifying days only: Pay per diem only when a driver is truly away from their tax home long enough to require sleep/rest and is under DOT HOS rules, not on local/home‑daily runs.
• Stay within IRS rates: Keep daily (or mileage‑based equivalent) per diem at or below the current transportation‑industry M&IE rate and never exceed the daily cap.
• Written policy & staff: Document eligibility, calculation method, and partial‑day rules, and ensure payroll and dispatch staff apply these rules consistently.
• Driver training: Explain to drivers what per diem is, when they qualify, how it appears on their settlements, and why accurate logs and trip information are critical to keeping the program and their tax treatment compliant.