Per Diem for HVAC Crews on Commercial Projects

For small HVAC contractor businesses with crews of 5-50 employees, it's essential to understand the rules surrounding per diem allowances for commercial projects. This means that the employer must pay for 50% of the crew's meals and lodging, and the employee must pay the remaining 50%. Failure to comply with these rules can result in penalties and fines. For the bigger picture, see our guide to hvac contractor expense management software.

Per Diem for HVAC Crews on Commercial Projects

The IRS requires HVAC crews to use an accountable plan to reimburse them for per diem expenses. As part of this plan, employees can be reimbursed for lodging expenses up to a certain cap, which varies by tax year. Lodging is reimbursed at the actual cost, up to the per diem cap.

There is no lodging per diem on a night when no lodging is incurred.

When using the per diem, crews must meet certain requirements. Output HTML only:

• Lodging is reimbursed at the actual cost up to the per diem cap.
• Lodging is only reimbursed for nights when lodging is incurred.
• The per diem cap varies by tax year.

Standard Per Diem Rates

This rate applies to all commercial projects, including office buildings, shopping centers, and other non-residential properties.

The standard M&IE rate for FY2027 is $68 per day, which includes $68 for lodging and $0 for meals and incidental expenses.

It's essential to note that some states may have unique policies or specific per diem rates. However, the federal GSA rates and the M&IE breakdown provide a general understanding of the standard per diem rates.

It's crucial to consult with your accountant or finance department to ensure compliance with all applicable rules and regulations.

This means that if your crew is eating out for lunch, only half of the meal cost is deductible.

High-Low Method for Travel

For travel from October 1, 2026, to September 30, 2027, the high-low method allows $329 per day for high-cost localities and $230 per day for other locations within CONUS. For travel from October 1, 2025, to September 30, 2026, the high-low method allowed $319 per day for high-cost localities and $225 per day for other locations within CONUS.

Note: The rate for incidental expenses only is $5 per day for travel within or outside the continental United States.

For travel on or after October 1, 2026, workers in the transportation industry can use a flat M&IE rate of $80 per day within CONUS and $86 outside CONUS.

Non-Standard Areas and Rates

There are 295 designated non-standard areas with higher per diem rates due to increased costs. These areas include popular tourist destinations, major events, and regions with high population density. Rates for some non-standard areas can change seasonally to reflect peak travel and tourism periods.

For example, rates may be higher in July and August when tourism is at its peak, and lower in January and February when the number of tourists is lower. Additionally, rates may be higher in areas with high demand for accommodations, such as major cities or popular vacation spots.

It is essential for HVAC contractors to research and confirm the non-standard area rates for a specific project before finalizing their travel and accommodation arrangements. This ensures compliance with the rules and avoids potential penalties or audits. It is also crucial to keep accurate records of the rates and any changes that occur, as these can impact the contractor's expense management and tax obligations.

Rates for FY2027

Per diem rates for HVAC crews on commercial projects are updated annually by the General Services Administration (GSA) and the Internal Revenue Service (IRS). These rates typically take effect on October 1st of each year.

These rates apply to all contractors, including those with 5-50 employees. It is essential to note that these rates do not include other expenses that may be eligible for reimbursement, such as lodging and transportation costs.

Tax rules, limits and rates change. Confirm current figures with the IRS or your accountant before you file.