Taking Per Diem on Business Expenses: A Guide for Independent Physicians

As a physician running your own micro-corporation, you might often find yourself traveling for moonlighting shifts, locum tenens assignments, or job interviews. One question I hear regularly from my SimpliMD coaching clients navigating this entrepreneurial path is:

“Can I pay myself per diem from my business on 24-hour shifts or business trips?”

The short answer is yes, and when done properly, per diem can be a valuable tool to streamline your expenses and even save you money. Let’s break this down so you can make the most of per diem rates for your business.

What Is Per Diem, and Why Should You Use It?

Per diem (Latin for “per day”) is a fixed daily allowance your business can pay you for meals, incidental expenses, and lodging while you’re traveling for work. Instead of submitting receipts for each coffee, lunch, or hotel night, you pay yourself a flat rate based on federal per diem guidelines. This rate varies by location and reflects the cost of living in that area.

Why use per diem? Because it simplifies record-keeping. When you pay yourself per diem, you don’t need to track individual meal receipts—just document the business purpose of your trip, the dates of travel, and the per diem rate you’re using. Plus, per diem allows for some flexibility: if you spend less than the allotted rate, the difference stays in your pocket.

How Per Diem Works for Independent Physicians

1. Moonlighting and Locum Tenens Shifts

When you’re working a 24-hour moonlighting or locum shift, you’re likely away from home, eating out, and possibly staying overnight. In this scenario, your micro-corporation can pay you a per diem rate to cover meals and lodging.

For example, let’s say you work a 24-hour shift in Chicago, where the federal per diem rate is $74 for meals and $185 for lodging. If you pay yourself the full $259 per diem for that day but spend only $50 on food and $150 on lodging, the remaining $59 is yours to keep. This arbitrage is completely legal and reflects the efficiency of managing your expenses wisely.

In this example, it is crucial to understand that the dollars under discussion are specifically pre-tax dollars drawn from your micro-corporation's business expense ledger. This strategic financial setup enables you to capitalize on the arbitrage difference, which you can personally retain without it being subject to taxation.

Essentially, this setup allows you to enjoy an advantageous tax-free status on these funds. Consequently, as an independent doctor who owns and runs a micro-corporation, you gain a dual tax advantage: immediate savings from using pre-tax money, and long-term financial gains from maximizing retained income.

This is what I am doing during my current locums assignment in Kansas, the financial arbitrage favors me, which I love (tax free income).

2. Job Interviews and Business Travel

Job interviews are another legitimate business expense if they align with your micro-corporation’s activities, such as seeking locum contracts or exploring practice opportunities. Here, per diem works the same way: your business pays you a daily allowance based on the federal rate for your destination.

Using the per diem approach not only simplifies your books but also creates a predictable budget for travel. Whether you’re meeting a prospective employer, attending a conference, or scoping out a new locum opportunity, the key is to document the business purpose and use the federal per diem tables for accuracy.

3. Federal Per Diem Rates

Per diem rates are set by the General Services Administration (GSA) and vary by city. You can find the current rates on the GSA website. The rates are broken into two components:

• Meals and Incidental Expenses (M&IE): Covers meals, tips, and small expenses.

• Lodging: Covers overnight accommodations.

For example:

• New York City: M&IE $79, Lodging $258

• Dallas: M&IE $64, Lodging $146

These rates are updated annually, so make sure you’re using the correct year’s table.

How to Implement Per Diem in Your Micro-Corporation

1. Set a Policy

As the owner of your micro-corporation, you’ll need to establish a clear per diem policy. This policy should outline when and how per diem is paid, referencing federal rates and specifying that the allowance is for legitimate business travel. Documenting your policy is important for tax compliance.

2. Track and Document Travel

To substantiate your per diem payments, keep records that include:

• The business purpose of the trip (e.g., “24-hour moonlighting shift” or “job interview”)

• Travel dates and locations

• Federal per diem rates applied

You don’t need receipts for meals and lodging when using per diem, but you do need proof that the travel occurred and was business-related.

3. Choose Per Diem or Actual Expenses

You can’t mix and match—it’s either per diem or actual expenses for a given trip. If you’re using actual expenses, you’ll need to save receipts and categorize them in your books. While this approach works well for certain trips, per diem is often simpler and provides some financial wiggle room.

Pros and Cons of Per Diem

Pros:

• Simplifies bookkeeping: No need to track every receipt.

• Predictable budgeting: Know your travel costs upfront.

• Potential savings: Spend less than the per diem and keep the difference.

Cons:

• Doesn’t cover all costs: For high-end dining or premium lodging, per diem may fall short.

• Requires consistency: Switching between per diem and actual expenses within a trip is not allowed.

Maximizing Per Diem as an Independent Physician

To get the most out of per diem:

• Plan ahead: Check GSA rates for your destination before booking travel.

• Be efficient: Choose cost-effective options for meals and lodging to maximize the difference between the per diem and your actual expenses.

• Stay compliant: Ensure your per diem payments align with IRS rules and document all business travel thoroughly.

Per Diem in Practice: An Example

Imagine you’re a family medicine resident running a micro-corporation and moonlighting in a nearby city. You work a 24-hour shift and stay overnight. The GSA per diem rate for meals is $60, and lodging is $120. Here’s how it breaks down:

• You pay yourself $180 for the day ($60 + $120).

• You spend $40 on meals and $100 on lodging.

• The remaining $40 stays with you as a business owner, reflecting the efficiency of your expense management.

Now apply this to a week-long locum assignment or a cross-country job interview trip, and you can see how per diem adds up to meaningful savings and simplified accounting.

Your Next Steps

Taking per diem is just one of many strategies to optimize your finances as a micro-corporation owner. Whether you’re moonlighting, pursuing locums, or traveling for interviews, leveraging per diem can help you stay organized, compliant, and financially savvy.

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