For government employees and military members, Temporary Duty (TDY) travel allowances are generally tax-free. The reason is that they fall under what the IRS calls an accountable plan. Understanding how accountable plans work, and how they differ from taxable reimbursements, is essential for staying compliant and avoiding surprises at tax time.

What is an accountable plan

An accountable plan is a reimbursement system that meets IRS standards for tax-free treatment. Under an accountable plan, travel reimbursements such as lodging and per diem are not counted as income as long as three rules are followed:

  • The expense must have a business connection
  • Receipts and documentation must be provided within a reasonable time
  • Any excess reimbursement must be returned

How accountable plans apply to TDY

TDY travel allowances are designed to fit within accountable plan rules. Lodging, meals, and incidental expenses are reimbursed only when supported by orders and documentation. As long as receipts are submitted correctly and excess funds are not kept, the reimbursements remain non-taxable.

What makes reimbursements taxable

If reimbursements fall outside the rules of an accountable plan, they become taxable income. This can happen when:

  • Receipts are missing or incomplete
  • Allowances are higher than actual expenses and the excess is kept
  • Personal expenses are claimed as official travel costs
  • Documentation is not submitted in a timely manner

Examples of accountable vs taxable scenarios

  • Accountable: Submitting an itemized lodging receipt with dates, location, rate, and proof of payment
  • Accountable: Reducing M&IE when meals are provided by a conference
  • Taxable: Keeping the difference when actual costs are below the reimbursed amount
  • Taxable: Failing to return unused advance funds

Why it matters for TDY travelers

When reimbursements are taxable, they increase your reportable income and could raise your tax liability. More importantly, taxable reimbursements may draw scrutiny from auditors. Staying within accountable plan rules keeps travel simple and compliant.

How to stay compliant

  • Submit complete receipts for lodging and other expenses
  • Track when meals are provided and adjust M&IE correctly
  • Return any unused reimbursements or excess payments
  • File travel vouchers promptly to meet IRS timing requirements

The bottom line

Accountable plans are the reason most TDY travel reimbursements are tax-free. By understanding how they work and avoiding mistakes that create taxable income, government employees and military members can ensure smoother travel, cleaner vouchers, and fewer tax complications.

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