Most people hear “per diem” and think it’s just a fancy term for lunch money. Honestly, it’s a lot more than that. Per diem laws affect workers, employers, and state employees every single day. And if you get it wrong, it can cost you real money.
Let’s break it all down in plain English.
What Is Per Diem?
Per diem is a Latin phrase. It means “per day” or “for each day.” In real life, it’s the daily allowance your employer gives you to cover travel costs. This includes meals, lodging, and small incidental expenses while you’re away from home for work.
Think of it like a daily travel budget. Your employer says, “You get this much money per day while you’re on the road.” Simple as that.
Per diem payments are meant to keep things easy. Instead of saving every receipt and filing a detailed expense report for every coffee and parking meter, you get a set amount. Right? It’s designed to reduce paperwork for everyone.
Who Sets Per Diem Rates in Indiana?
Okay, this part is important. There isn’t just one set of rules. There are actually two different systems at play in Indiana.
The federal government sets per diem rates through the U.S. General Services Administration, also known as the GSA. These rates are mandatory for federal employees traveling in Indiana. Many private companies also follow GSA rates as a benchmark.
Indiana state government has its own rates for state employees. The Indiana Department of Administration, or IDOA, sets these rates. They apply to anyone who works for the State of Indiana and travels for official business.
Private employers? That’s a whole different story. Stay with me here.
Indiana State Employee Per Diem Rates
If you work for the State of Indiana, the IDOA controls your travel reimbursements. These rates were last updated on September 4, 2022, for meals, and October 1, 2024, for lodging.
Here’s how the meal subsistence works for Indiana state employees. You must be on overnight travel to claim meal subsistence. Same-day travel doesn’t qualify.
For in-state travel, the full daily meal rate is $41.00. If you leave before noon, you get the full $41. Leave between noon and 4:30 PM, and you get $20.50. Leave after 4:30 PM? You get nothing for that day.
For out-of-state travel, the rates are higher. The full daily amount is $52.00. The same departure-time rules apply.
On your return day, the same logic works in reverse. Return after noon and you get the full daily rate. Return before noon but after 7:30 AM, you get half. No subsistence is paid for travel segments under 7.5 hours.
Indiana State Lodging Rates
Here’s where things get location-specific.
The standard in-state lodging rate is $110 per night. That covers most of Indiana. But two cities have higher rates because they’re more expensive.
Indianapolis and Carmel have a lodging rate of $133 per night. Lafayette and West Lafayette have a rate of $123 per night. These updated rates went into effect on October 1, 2024.
Wondering why some cities cost more? It’s basically because hotels in those areas charge more. The state adjusts rates to reflect real-world costs.
Federal GSA Per Diem Rates for Indiana (FY 2026)
Now let’s talk about the federal rates. These apply to federal employees and are widely used by private companies too.
For most of Indiana, the standard GSA rate for FY 2026 (October 2025 through September 2026) is $178 per day total. That breaks down to $110 for lodging and $68 for meals and incidentals.
Indianapolis and Carmel have a higher designated rate. The lodging rate for that area is $133 per night. The meals and incidentals rate is $80 per day. So the total can reach $213 per day in Indianapolis.
There are three specific areas in Indiana with their own GSA-designated rates. Most of the rest of Indiana falls under the standard CONUS rate. CONUS stands for Continental United States, by the way.
One important rule: on your first and last day of travel, you only get 75% of the daily meal rate. That’s because those are partial travel days.
Per Diem Laws for Private Employers in Indiana
Here’s where a lot of people get surprised. Honestly, this is the part most people miss.
Indiana law does not require private employers to reimburse employees for business travel. There is no state law mandating expense reimbursement for private-sector workers.
So if your company doesn’t have a travel reimbursement policy, they technically don’t have to pay you per diem at all. That sounds harsh, but it’s the law.
Here’s the catch though. If your employer has a written policy promising reimbursement, they must follow it. A company policy becomes a binding agreement. If they put it in writing and then don’t pay, you may have a breach of contract claim.
One more thing. Federal law still applies. Your per diem reimbursements cannot push your pay below the federal minimum wage of $7.25 per hour.
IRS Tax Rules for Per Diem
This part matters a lot, especially for your taxes.
Per diem payments are NOT considered taxable income if two conditions are met. First, the payment must be equal to or less than the federal per diem rate. Second, the employee must file an expense report with the employer.
Pretty straightforward when you follow the rules.
That expense report needs to include the date of travel, the place of travel, and the business purpose of the trip. You must file it within 60 days of the trip. Fail to do that, and the per diem becomes taxable income.
Here’s where it gets serious. If your employer pays you more than the federal rate, the excess is treated as wages. That means income taxes and payroll taxes are due on the overage. Your employer will owe taxes too.
Also, if your employer gives you a flat daily amount and never asks for an expense report, the entire per diem is treated as taxable wages. No exceptions.
The High-Low Method: A Simpler Option
Some employers use what’s called the high-low method to simplify things. Instead of tracking exact GSA rates by city, they use two flat rates.
For October 2025 through September 2026, the IRS high-low rates are $319 per day for high-cost locations and $225 per day for everywhere else in the continental United States.
Most of Indiana falls into the lower cost category under this method. Indianapolis is not currently designated as a high-cost city under the IRS high-low method.
One important rule with this method: if you use it for an employee, you must stick with it for all their travel that calendar year. You can’t switch back and forth.
Also, business owners who own 10% or more of the company cannot receive per diem under this method.
Mileage Reimbursement: A Separate Rule
Per diem does NOT cover mileage. You need to know this.
Per diem covers meals, lodging, and incidentals only. Driving reimbursement is calculated separately. For Indiana state employees, the mileage reimbursement rate is $0.49 per mile, effective June 15, 2022.
Private employers can use the IRS standard mileage rate as a benchmark. If you reimburse above the IRS rate, the excess is taxable income for the employee.
What Per Diem Covers (and What It Doesn’t)
Per diem is designed for specific costs. Let’s break down what’s included.
Meals include breakfast, lunch, and dinner. Incidentals cover things like tips for hotel staff, laundry, and dry cleaning. Lodging covers hotel or motel costs.
Here’s what per diem does NOT cover: transportation, mileage, airfare, parking, or registration fees for conferences. Those are reimbursed separately if your employer allows it.
One more rule. If a meal is provided at no cost, like included with a hotel stay or paid for at a conference, you must deduct that meal from your daily subsistence claim. The state of Indiana is very clear on this: the state must not pay for a person’s meals more than once.
What Happens If Per Diem Is Mishandled?
Not sure what counts as a violation? Let me explain.
If an employer doesn’t follow its own written per diem policy, employees can potentially sue for breach of contract. It’s more common than you think.
If a company consistently pays per diem above the federal rate without treating the excess as wages, they could face IRS penalties. The IRS can reclassify those payments as taxable wages and bill the employer for back taxes and penalties.
For employees, if you receive per diem and don’t file proper expense reports, you could end up owing income tax on money you already spent on travel. That’s a painful surprise come tax time.
How to Stay Compliant
You’re not alone if this feels like a lot. Here’s what you actually need to do to stay on the right side of the law.
If you’re an employee, always file your expense report within 60 days of your trip. Include the date, location, and business purpose. Keep your claims at or below the federal GSA rate for your location. And never claim a meal that was already paid for by someone else.
If you’re an employer, write down your per diem policy and stick to it. Choose a consistent method, either GSA rates or the high-low method. Keep records of all expense reports. Make sure any per diem above the federal rate is reported as wages.
If you’re a state employee, check the IDOA website for current rates before you travel. Remember that you must be on overnight travel to claim meal subsistence. Submit all travel reimbursements with the required documentation.
Frequently Asked Questions
Does Indiana law require employers to pay per diem? No. Indiana does not require private employers to reimburse employees for travel expenses. However, if your employer has a written policy, they must follow it.
Are per diem payments taxable in Indiana? Per diem is not taxable if payments are at or below the federal GSA rate and you submit a proper expense report within 60 days.
What is the standard per diem rate for most of Indiana in 2026? The standard GSA rate is $178 per day total, which includes $110 for lodging and $68 for meals and incidentals.
What is the per diem rate for Indianapolis in 2026? Indianapolis and Carmel have a lodging rate of $133 per night and a meals and incidentals rate of $80 per day.
Can I claim per diem for a same-day work trip in Indiana? For Indiana state employees, no. Meal subsistence requires overnight travel. Private employers may have different policies.
What happens if my employer pays me more than the federal per diem rate? The excess is treated as taxable wages. Both you and your employer may owe taxes on the overage.
Does per diem cover gas or mileage? No. Mileage is reimbursed separately. Per diem only covers meals, lodging, and incidentals.
Final Thoughts
Now you know how per diem really works in Indiana. It’s not just lunch money. It’s a system with real rules, real rates, and real consequences if you get it wrong.
The biggest takeaways? Indiana doesn’t require private employers to pay per diem, but if they promise it in writing, they must deliver. Federal GSA rates set the non-taxable ceiling. Always file your expense report on time. And never claim a meal someone else already paid for.
When in doubt, check the official IDOA website for state rates or the GSA website for federal rates. And for tax questions, talk to a tax professional or CPA.
Stay informed, stay compliant, and safe travels.
References
- Indiana Department of Administration Travel Reimbursement Rates – Official IDOA page with current in-state meal and lodging rates for Indiana state employees.
- GSA FY 2025 Per Diem Rates for Indiana – Official federal per diem rates for Indiana locations, including Indianapolis/Carmel.
- IRS Notice 2025-54: 2025-2026 Special Per Diem Rates – Official IRS notice covering high-low per diem rates effective October 1, 2025 through September 30, 2026.
- IRS Per Diem FAQ – IRS guidance on when per diem is taxable, expense report requirements, and accountable plan rules.
- FederalPay.org Indiana Per Diem Rates – Searchable database of federal per diem rates by Indiana city and county.
