Per Diem California Rates: 2025 Small Business Guide

If you or your employees are traveling for work, you’ll want to know how to compensate for travel across the states, including per diem California rates. When traveling for work in California, understanding per diem rates can save you time and hassle. It ensures employers can reimburse employees without the need for endless receipts. 

Let’s break down what per diem in California entails and how it works.

What is per diem in California?

Per diem is a daily allowance for expenses incurred while traveling for work. It covers meals, lodging, and incidental expenses, making it easier to manage and reimburse travel costs. In California, per diem rates vary by location. A standard rate applies across the state, with some notable exceptions. High-cost areas like San Francisco or San Diego will have higher rates compared to other regions.

These rates are set to reflect the cost of living and typical expenses in each area. Employers use these set rates to reimburse employees without requiring detailed receipts for every expense. This simplifies the process and ensures employees receive fair compensation for their travel-related costs.

You may be wondering: is per diem required by law? While it is not legally required, per diem can be a helpful guideline to follow alongside considering travel time pay.

Types of per diem rates in California.

So how does per diem work? There are different types of daily per diem rates, and understanding the different types can help you plan your travel budget more effectively and avoid out-of-pocket expenses.

Lodging per diem rates.

Lodging per diem rates cover the cost of your hotel or other accommodations while traveling for work. These rates vary by location within California, reflecting the cost of living in different areas. For instance, San Francisco lodging will have higher per diem rates compared to smaller cities. 

The rates are set to ensure you can find suitable accommodations without out-of-pocket expenses. Always check the current rates for your specific destination to plan accordingly.

Meals and incidental expenses (M&IE) per diem rates.

Meals and Incidental Expenses (M&IE) per diem rates cover the cost of your meals and other small expenses incurred during your travel. This includes breakfast, lunch, dinner, and incidental costs such as tips for service staff. The M&IE rates for per diem in California also vary by location. High-cost areas will have higher rates to accommodate the increased expense of dining out. 

These rates ensure you can cover your daily meal expenses without needing to keep track of every receipt. Regardless of where you are in California, the first and last day of travel amount to 75% of the usual per diem rate. 

Combined per diem rates.

Combined per diem rates include both lodging and M&IE rates. This comprehensive rate simplifies the reimbursement process by providing a single daily allowance that covers all your travel expenses. By using the combined rate, you can easily manage your budget for both accommodation and meals.

This method is particularly useful for longer trips, as it provides a consistent daily allowance, making it easier to plan and manage your expenses. Always refer to the latest combined per diem rates for your specific travel location in California to ensure accurate budgeting. You can simplify per diem reimbursements by integrating them into your payroll tools.

How much is per diem per day in California?

The per diem rate changes with each fiscal year. This fiscal year began in October 2024 and extends until September 2025. Here are the California per diem rates for 2024 leading into 2025: 

• Lodging: the standard California per diem rate for lodging is $110 per day. Be sure to check if the area of business travel is not covered by a specified rate. 
• Meals and incidental expenses (M&IE): the standard California per diem rate for M&IE is $68 per day, except for the first and last days of travel, which amount to $51. Be sure to check if the area of business travel is not covered by a specified rate. 

How to calculate per diem in California.

Calculating per diem correctly ensures that you are reimbursed fairly for your travel expenses without any hassle.

1. Determine applicable per diem rate.

First, you need to find the General Services Administration (GSA) rates for the specific location in California where you or your employees will be traveling. The GSA updates these rates annually to reflect the cost of living in different areas.Make sure to select the correct city or county to get accurate rates for lodging, meals, and incidental expenses. ‍

2. Calculate number of days.

Next, count the number of days the employee will be traveling for work. This includes the full days spent at the destination as well as any partial days. For instance, if an employee leaves on a Monday and returns on a Friday, you would count five days. Be precise in your count to ensure accurate reimbursement. ‍

3. Multiply rate by number of days. 

Finally, multiply the daily per diem rate by the total number of days to get the total per diem amount. For example, using the California per diem daily rate for lodging of $110 and the rate for meals and incidental expenses rate of $68, if the employee is traveling for five days, you would calculate it as follows:

• Lodging: $110 x 5 days = $550
• Meals and Incidental Expenses: $68 x 5 days = $340

Add these amounts together to get the total per diem: $550 + $340 = $890. 

4. Factor in first and last days of travel. 

The M&IE per diem rate for the first and last days of travel is 75% of the usual rate. Make sure you factor this into your final calculations. If your trip spans five days, with the first and last days being partial travel days, your total M&IE calculation would be:

• First day: $51
• Last day: $51
• Full days: $68 x 3 days = $204 
• Total M&IE: $51 + $51 + $204 = $306

Then, combine that with the three nights of lodging: 

• Lodging: $110 x 3 days = $330
• Total M&IE: $306
• Combined: $330 + $306 = $636

By following these steps, you can accurately calculate your per diem for a trip in California, ensuring you stay within budget and receive proper reimbursement.

{{banner-cta}}

Is per diem taxable in California? 

Understanding the IRS rules for per diem is crucial to ensure that your travel reimbursements remain non-taxable and compliant. The IRS sets per diem rates for various locations to standardize travel expense reimbursements. 

Employers can choose to use the IRS per diem rates or establish their own. Using IRS rates simplifies compliance and ensures that per diem payments remain non-taxable. If employers set their own rates, they must ensure these rates do not exceed the IRS limits to keep the payments tax-free. So are per diems taxable? Per diem payments are not taxable if they fall within the IRS-established rates.

This means employees do not have to report these payments as income, and employers do not need to withhold taxes on them. This tax benefit makes per diem an attractive option for both employers and employees, streamlining the reimbursement process. Detailed recordkeeping is required for tax purposes, so you may want to use team communication tools to ensure that your employees keep you updated on their expenses.

Even though employees do not need to provide receipts for each expense, employers must maintain accurate records of the per diem payments. This includes documenting the dates of travel, locations, and the applicable per diem rates used. Proper documentation ensures compliance with IRS regulations and helps avoid potential tax issues.

Pay out your per diems with ease. 

Calculating travel reimbursements can be tricky if you’re doing it manually. If you’re a small business owner, you have a million better things to spend your time on, but you know it’s important to compensate your employees fairly and promptly. 

That’s why Homebase payroll is the best way to automate processing payments for your employees while staying compliant with local laws. Take per diem pay off your plate with the payroll peace of mind that automation provides.  

Managing travel expenses can be complex, but understanding per diem rates in California simplifies the process. Homebase can help you streamline all aspects of employee management, from scheduling to payroll. Let's make work easier. Get started today with Homebase by signing up here.