New federal travelers ask me this constantly: can you keep unused per diem money? The answer is yes and no, split right down the middle of the per diem itself. The meals and incidentals half is yours to keep. The lodging half is not. Confusing the two is how people end up with an expense report problem, so let me lay out exactly where the line sits.
The split: M&IE is a flat payment, lodging is a reimbursement
GSA per diem has two components that work in opposite ways. Lodging reimburses what you actually spent, up to the locality cap. You submit receipts, and the government pays the receipt amount. There is nothing to "keep" because you never receive more than you spent.
M&IE, meals and incidental expenses, works the other way around. The Federal Travel Regulation pays it as a fixed daily allowance for your locality. You do not submit meal receipts. If the M&IE rate is $68 and you spent $40 on food and tips that day, the remaining $28 stays in your pocket. That is not a loophole. It is how the system is designed: a deemed-substantiated allowance, where the IRS treats the flat rate as adequate accounting for the expense, surplus included.
What the numbers look like on a real trip
Take a three-day trip to Chicago, where the M&IE tier is $79 a day. You eat sensibly and spend $45 a day on meals and tips. Over three days you collect $237 in M&IE and spend $135. You keep $102, and nobody at your agency will blink, because the voucher never asks what you ate.
Now the lodging side of the same trip. You stay at a $240-a-night hotel under a locality cap of $258. You are reimbursed $240. If you had booked a $140 room instead, you would be reimbursed $140, not $258. The gap between the cap and your actual bill does not come to you. That asymmetry is the whole story: frugality on meals is rewarded, frugality on lodging is not.
The honest mistakes that get people in trouble
Two behaviors cross the line, and both get audited. First, inflating a lodging receipt or submitting a rate you did not pay is fraud, not frugality. Second, claiming M&IE for days you were not in travel status, like padding an extra day onto the trip, is the same category. Keeping legitimately unspent meal money is fine. Inventing travel is not.
Two details worth knowing before your voucher: first and last travel days pay 75 percent of the M&IE rate, so a three-day trip is really 0.75 plus 1.0 plus 0.75 days of the rate, not three full days. And if meals were provided free, say at a conference, the M&IE is reduced for those meals under the deduction schedule.
The private-sector version works the same way
If your employer runs an IRS accountable plan with per diem allowances, the same logic holds: deemed-substantiated expenses can leave a surplus in your pocket, tax-free, as long as the plan's allowance is reasonably calculated against real travel costs. A plan that pays far more than actual expenses can lose accountable-plan treatment, which is the employer's problem to solve, not yours.
Run your own trip math: Calculate your GSA per diem
Frequently asked questions
Can federal employees keep unused per diem money?
Yes for the meals and incidentals (M&IE) portion, which is paid as a flat daily allowance with no receipts required. No for the lodging portion, which reimburses only what you actually spent up to the locality cap.
Do I need to submit receipts for meals on federal travel?
No. The M&IE allowance is deemed substantiated, meaning the flat rate stands in for receipts. You do need receipts for lodging and for any single expense over $75.
Can I pocket the difference if my hotel costs less than the cap?
No. Lodging is reimbursed at your actual cost. Booking a $140 room under a $258 cap gets you $140, not the cap amount. The surplus stays with the government.
Is unspent M&IE per diem taxable income?
Under a proper accountable plan, no. The IRS deems the flat M&IE allowance substantiated, so the unspent portion is not treated as wages. If a plan pays allowances far above reasonable travel costs, it can lose accountable-plan status.
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Related reading: The 75 Percent Rule: How GSA Per Diem Works on Your First and Last Travel Days · Hotel Over the GSA Per Diem Rate? How Actual Expense Reimbursement Works · FY2027 GSA Per Diem Rates: What Changed on October 1