How to Prepare for Tax Season as a Trucker
The trucking industry has been facing major changes, ranging from updated driver training regulations to better pay incentives. One constant across all jobs, however, is tax season. Truckers have numerous tax deductions that play a role in gross income adjustment (and overall taxes to be paid). Preparation is key for not only getting your taxes done on time, but getting them done with the proper deductibles to save you money. New tax incentives are also in the works that can make a huge difference in your gross earnings. If you are a contract driver or owner operator, every opportunity to save money is important!
Before you investigate your options, it is important to remember that your specific type of employment will determine how your taxes are filed. Company drivers, who receive W-2 forms from their employers, are not eligible for tax deductions. If you are a contract driver or an independent owner operator, you are eligible for write offs. Do not pass up on all possible deductions when you file your taxes! Below you will find some of the most common deduction options for drivers:
- Meal Expenses: Meal expense deductions, also known as per diem deductions will typically not apply for local drivers. If you are a regional or long-haul driver, meal expenses are any necessary or incidental food purchases made when you are traveling away from home. The Taxpayer Certainty and Disaster Relief Act in 2020 temporarily set the deduction to 100%, but as of the beginning of 2023, the rate has returned to the previous 80%. You will have the option of either keeping all receipts to send in the exact amounts spent, or go by the per diem allowance to claim a set amount per day. You can find a handy per diem rate calculator here.
- Medical Expenses: As a driver, you are often required to get medical exams by the DOT or your employer. All work-related medical expenses, such as these exams, can be claimed as deductions; personal medical expenses cannot be claimed as a business-related deduction.
- Vehicle Expenses: Your truck is considered a non-personal use vehicle. Maintenance costs such as cleaning, new tires, and oil changes fall under this category. Other vehicle-related expenses include depreciation and loan interest.
- Travel Expenses: While the IRS has a per diem rate for travel expenses in other industries, truckers are required to report their actual travel expenses. Fuel expenses, lodging, tolls, and parking are all eligible for deduction when you are traveling away from your tax home on a haul.
- Tools and Equipment: Tools and other equipment needed to perform your job are all eligible for deduction. This can include bungee cords, tarps, wrenches, tape - all tools you need for your vehicle and for your hauls!
- Education: If you are paying for driver school, ongoing training, or special license training, you can add these for deduction. Any education that is relevant to your job counts, even courses about running a small business!
- Business-Related Fees: Contract drivers and owner operators are in charge of their own small business. That means business-related fees will qualify for deduction! Common business fees truckers pay that count for deduction include dispatch fees, insurance, association dues, bank fees, and licensing fees. Basically, think of all the fees you are paying in terms of your operations.
- Cell Phone and Communication: Much like tools, any technology necessary for your job will count as a tax deduction. Communication electronics such as cell phones, laptops, and tablets all count as long as you use them in part for work purposes. Other electronics that count are CB radios, ELDs, and GPS devices.
Keep thorough records of your expenditures, particularly those related to the above, in preparation for your taxes. Important receipts to track include ones for lodging costs, fuel costs, tools and equipment, and repairs.
The Safer Highways and Increased Performance for Interstate Trucking Act (SHIPT Act), introduced on January 17th, is in the works with the House of Representatives. This bi-partisan bill has numerous goals for improving the industry, among which are tax incentives that will aid in recruiting and retaining drivers. The act calls for a new refundable tax credit of up to $7,500 for CDL A drivers that logged at least 1,900 hours in the year. In addition, it calls for a refundable tax credit of up to $10,000 for new drivers or drivers in a registered apprenticeship. Both tax credits would last for two years, from 2022 through 2023. Should the bill take effect, it will provide a significant amount of money back to both experienced and new drivers.
Owner operators and contract drivers, who are self-employed, have many opportunities to save money through tax deductions. Take time to review all expenses related to your job, whether it is travel costs, tools, insurance, or even education. In addition, the SHIPT Act proposes new tax incentives that can benefit both experienced and new drivers. Submitting the right information and staying on top of relevant deductions means saving the most amount of money possible, so don’t delay on getting organized now!