No matter how much experience you have in driving a truck, if you feel the call to explore the endless highways, you will enjoy every moment on the road. However this feeling typically disappears without a trace when the tax period approaches. Do you know how to avoid putting yourself under emotional strain and falling out of love with your life’s work? Take it easy and do not waste the opportunity to save your money with the help of tax deductions for truck drivers.
We have compiled some tips on how to manage various kinds of business expenses throughout the year to reduce annual state taxes and local taxes and reap eventual benefits.
- Who Qualifies as a Truck Driver for Tax Purposes?
- Requirements for Claiming Tax Deductions as a Truck Driver
- Common Tax Deductions for Truck Drivers
- Non-deductible Expenses for Truck Drivers
- Benefits of Claiming Tax Deductions as a Truck Driver
- List of Tax Deductions for Owner Operators
Who Qualifies as a Truck Driver for Tax Purposes?
The laws on trucker tax returns changed several years ago. It did not matter before whether you were an owner operator or a company driver — everyone could claim tax deductions. Today, we do not talk about employees of trucking companies in terms of truck tax deduction any longer. They just submit a W-2 form at the end of the year. In this case an OTR or regional company driver’s expenses are not tax deductible, even if they are related to the job.
Self-employed drivers have reserved the right to deduct their business expenses from the taxable income. This applies to owner operators and all kinds of independent contractors.
Requirements for Claiming Tax Deductions as a Truck Driver
The tax inspector determines whether you meet the requirements for claiming a tax deduction by checking tax documents you have.
A company driver now submits a W-2 and can no longer report separately such things as fuel expenses, maintenance or parking fees on truck driver tax credits.
Owner operators' tax write-offs are based on 1099-NECs, which they receive from their customers for each transaction exceeding $600 at the end of the year. They then fill in Schedule C for per diem expenses and Schedule SE for self-employment taxes. All these forms should be submitted along with Form 1040 to file an annual income tax return.
Common Tax Deductions for Truck Drivers
Deductible expenses for truck drivers include a long list of running costs, and to claim them you have to submit to the IRS a record of the expense, including receipts and other supporting documentation.
Truck Driving Education
It is very important for truck drivers to constantly improve their professional skills by adding endorsements. If you are going to attend a truck driving school to get a CDL, you can deduct the cost of tuition and manuals from your taxes. Note that if you are getting a degree in, say, medicine or law, you cannot count on tax deduction, because it is not related to truck driving.
Tax breaks for truck drivers are mainly associated with fuel, repairs, maintenance and equipment depreciation expenses. This is true only for vehicles used for trucking business.
Owner operators in the U.S. submit quarterly IFTA reports, and when the time to pay taxes comes, drivers can also deduct fuel costs. However, the taxpayer should retain some documents as evidence in the form of a receipt or invoice.
If you need to buy tires or bungee cords, or to have a truck washed after a long haul, you can deduct 100% of the costs.
Depreciation expenses can be deducted in two ways.
- Straight-line depreciation is spread evenly over several tax years.
- Accelerated depreciation implies the gradual decrease of equipment’s value and an appropriate deduction rate.
Additional owner operator tax write-offs include licenses and permits, rental expenses and truck lease payments if you use truck leasing to expand your over the road fleet.
To apply for a mileage deduction, keep mileage logs that include the date, location and purpose of the trip, and the total miles driven. There is normally no need to submit the log to the IRS — they are only interested in the odometer readings at the start and the end of each year. Remember to submit the odometer readings if you recently bought a new truck.
As for other travel expenses, the IRS does not establish a per diem expense for drivers. Normally, they require claiming the actual costs of travel. Truck drivers have to keep all receipts for tolls fees, accommodation and parking expenses. If you pay toll fees electronically, you should save a copy of the digital receipt.
You are allowed to deduct certain office expenses, including software, photocopying, stationery (such as pens, staplers and paper clips), and postage. Be ready to show that these are requisite business expenses, not personal expenses.
When determining the taxable amount, owner operators can cut off the value of insurance premiums associated with business, such as liability insurance, property damage insurance, and loss of income insurance that covers cargo damage or loss.
Self-employed drivers can also submit their personal health insurance receipts for tax deduction. As it is not a commercial expense, health insurance premiums are deductible as an “above the line” deduction on Form 1040.
All communication expenses, such as desktop or portable computers for work, or monthly ISP charges, are deductible. The costs of telephone service, communication equipment, mobile phones, and business calls while on a business trip, including sending faxes, are deductible as long as the taxpayer can justify them. Be ready to produce your contract with the mobile carrier or ISP if asked to.
Many self-employed truck drivers join trucker unions or other truck operator associations. This kind of membership provides a lot of benefits for small-business owners, such as access to exclusive products and valuable services that help their trucking business to grow. Association fees and dues are deductible.
Non-deductible Expenses for Truck Drivers
Self-employed drivers who receive 1099-NECs can claim most expenses related to their business for tax deduction. However, some expenses are not deductible. To avoid future penalties, be sure to submit the correct data for a tax deduction, done on a fair and reasonable basis that reflects the purpose of the expense.
Trucker Meals Deduction
Drivers who spend most of their working time away from home can claim a trucker meals deduction. Long-distance drivers who drive far from their home or office (shown in the tax declaration as “tax home”) can deduct 80% of the cost of meals.
You can submit all your food bills and claim your actual expenses. However, the per diem method implies less paperwork and fewer supporting documents, because there is no need to keep the receipt for every snack or coffee.
If you mostly drive locally, less than a night away from your “tax home”, meal expenses will not be deductible.
If your business partners reimburse your expenses, you are not allowed to include them in the list of tax deductions.
For example, you can deduct from the payable tax amount the legal fees you pay, including an objection or appeal to a business court. However, the full amount of these deductible fees must first be reduced by any other reimbursement of your expenses that you receive.
Home or Personal Cell Phone
If you use the same device for both your business and personal needs, you can only deduct the part used for business, and you must prove that these expenses were intended exclusively for work.
If your work clothes can be adapted for everyday use, even if you use them only when driving a truck, you cannot include their cost in a tax deduction for truck drivers. Only overalls or things required to make your work safe, such as goggles or gloves, can be included into tax-deductible accessory expenses.
Although work boots are not tax deductible, we advise you to learn more about why investing in quality boots for truck drivers is crucial for your comfort and safety on the road, check out our article here.
Benefits of Claiming Tax Deductions as a Truck Driver
Claiming tax deductions that relate to your trucking business has many benefits, mainly because it allows you to save on taxes while getting things you need for doing business.
Reduce Your Taxable Income
By deducting the bulk of your expenses from your taxable income, you pay less in taxes. How does this work? You take your gross income and then calculate your adjusted gross income on your tax forms by reducing it by the amount of the deductible expenses. As a result, you only have the adjusted gross income amount taxed.
Get a Refund
Owner operators can claim a tax refund for the previous tax period. You are eligible for a refund when the taxes paid to the IRS are greater than the actual tax payable.
It actually means that you can get more tax refunds by expanding your list of owner operator tax deductions for the previous fiscal year.
Increased Cash Flow
You can cover the daily needs of your business without affecting your cash flow. You can even increase it by lowering your taxable income or getting tax refunds. Sounds great, doesn’t it?
List of Tax Deductions for Owner Operators
The list of standard tax deductions for owner operators typically includes the following:
- Fuel expenses;
- Repairs and maintenance, such as equipment expenses and depreciation;
- Office expenses;
- Insurance premiums;
- Licenses and permits;
- Rental and truck lease;
- Mileage deductions;
- Travel costs, such as meals, accommodation, parking and toll charges;
- Communication expenses;
- Association membership fees.
The list of tax deductions for owner operators given in this article is not complete. Tax cut-offs may be different in each individual case, but a sensible approach to tax deductions can even see you derive profits from your business expenses. It is important to keep a record of any costs you have that are job-related throughout the tax period. The tax season may then become your favorite time of the year.
Being part of a great team in a leading trucking company, such as HMD Trucking, you can always ask an expert for help if you have any doubts.
Whether you want a position of a company driver or you are just starting your career as an owner operator, we encourage you to join the HMD team. Please fill in the form for the driver’s job below.
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