A Guide to Tax Deductions for Truckers
Even though taxes are not due for a couple of months, it is common practice to begin completing the paperwork in advance. Truckers in particular experience a lot of tax liability, whether they are owner operators or company-retained drivers. Like many other careers, truckers have numerous tax deductibles that play a role in gross income adjustment (and overall taxes to be paid). Staying thorough and organized with your finances and expenses can make an immense difference in your tax deductions. However, what qualifies as a legitimate deductible claim varies for each type of trucker position. Though filing taxes can be a long and complex process, keeping potential deductibles in mind as you work will help you prepare to file for them later!
An owner operator and company driver will receive different forms to complete regarding taxes and will also have different options for their tax deductibles. Owner operators are considered "independent contractors," and complete a 1099 worker form to report miscellaneous earned income. Since independent contractors have less support from the companies they work with, they have a wider array of options that qualify as deductibles and can file them on Schedule C. Company drivers receive a W-2 form from their employers to report their annual income and use the information from the form to then file their taxes with a 1040 form. Many company drivers receive different types of reimbursements from their employers for things owner operators must pay for themselves; any costs that are reimbursed by your employer will not qualify for deduction. Additionally, most of these tax deductions will not be applicable to local drivers.
Common trucker expenses that can be claimed by both independent and company drivers depend on several factors. Always do your own research about your company's and the government's compensations when deciding which deductions we address in this article may work for your unique situation. One more universal deduction that applies to truckers (whether they lease or own trucks) are maintenance fees, fuel, tires, and other fixes to your vehicle when on the road. Keep in mind, your repairs will not qualify if they were performed by yourself. Over the years, equipment will depreciate from its constant usage. Equipment that depreciates includes the tractor-trailer or vehicle itself, as well as electronics, office supplies, and furniture. Independent truckers have the option to file these as deductibles, so keep track of your professional equipment and usage over the years.
Any costs related to obtaining and maintaining your CDL license are considered tax-deductible. If you are required to gain additional education or licensure by your employer, all included costs will also be tax-deductible. If you are in a union or trade association, you may also include these costs when filing. Cell phone and internet costs are another deductible most truckers can file for. The IRS will only allow up to 50% of these costs, however, since these items can also be partially for personal use. Additionally, any personal items that you purchased yourself may qualify, so long as they are used for business purposes. This can include simple items like planners and logbooks, calculators, pens, and flashlights. Though these are small things, the payback truly adds up when you receive your deductions.
Life on the road inherently includes eating on-the-go. Regional and OTR drivers will have to find their meals at various stops and restaurants along the way. Depending on the distance of your route, there are different rates for the amount the IRS will consider tax-deductible. The standard rate of per diem for those in transportation is $66 per day for in-country travel; for those whose routes take them outside the US, it is $71 per day. Additionally, travel expenses themselves (that are not reimbursed by the company) may qualify as deductibles. Travel expenses include lodging, parking fees, and licensing fees. It is crucial to keep a detailed and accurate log of your travels. This log should include more than the start and destination- include as many details as possible such as cities, stops, and miles traveled. To ensure your travel expenses will qualify, hold on to all relevant receipts. Local drivers cannot claim travel and food deductions since they return home after their routes.
Although tax season has only just started, staying on top of paperwork will make it easier to send it all in. While you can choose to file your taxes online or through mail submission, April 15th remains the universal deadline for submission. If you are still feeling lost when it comes to your taxes (and how to get deductions), consider reaching out to a tax consultant for further assistance. Many tax assistance companies offer free consultations online or over the phone so you can easily get some of your questions answered. Whether you're an experienced owner operator or a rookie driver starting out with your first company, filing for tax deductions can be a rewarding payback, so stay active and start your paperwork today!