Truckers, especially those who are “over-the-road” drivers who spend extended periods of time hauling loads far from home, have some unique business expenses. If you’re a truck driver, you already know this. If you’re not a trucker, odds are you’ve made a restroom stop mid-way through a road trip and seen truck drivers gassing up, stopping for a shower, or repairing their rig in a truck stop parking lot. Many professional needs must be taken care of on-the-fly when your place of business has 18 rolling wheels.
So, how much of what happens on the road is actually deductible? The easiest – and safest – way to confirm this is to talk to a tax professional. No matter what your profession, when taxes are concerned, this is usually the case. And with conflicting reviews of recent tax reform and how it has affected the trucking industry, it’s a great idea to consult with a personal tax advisor.
However, there are some general guidelines to follow and things that are just good to know when it comes to considering what expenses a truck driver may be able to deduct.
How much a driver spends and what stake he or she has in the trucking company will affect what happens during tax season. Because there are differences in the expenses of an owner-operator vs. a company driver, that is the first thing to consider. Company drivers generally have less up-front expenses, as the company tends to pay for or reimburse daily expenses incurred during the normal course of business. Owner-operators, however, typically put their own money on the line and expect to get some of that back at tax time.
What Expenses do Truckers Run into on the Road?
If your job takes you on the road for days, maybe weeks, at a time, you would expect that a lot of what happens while you’re away from home might be considered a business expense. The cost of fuel seems like an indisputable write-off. But what about a trucker’s $10 shower on the road — is this tax deductible? When the lines between personal and professional time are so blurred, so must the idea of which costs on the road are considered “business” expenses.
The good news is that owner-operators, like other small business owners, are typically allowed to deduct a percentage of business-related expenses, such as: mileage, truck repair and maintenance, overnight hotel expenses, union dues, license and permit expenses, leasing costs, business phone and internet, fuel, and daily meal allowances.
There is a standard “per diem” cost associated with meals when on the road that truckers know well: According to Overdrive Magazine in October 2018, “Owner-operators are now allowed to claim a meal per diem of $66 per day they’re away from home, according to a new per diem structure announced this week by the IRS.”
But, again, not all deductible expenses are created equally. Day drivers, those truckers who work daily. local routes and are home each night, obviously can’t claim a per diem. But now, even over-the-road company drivers can no longer claim the per diem deduction.
This distinction is new as of 2018 and has caused confusion among truckers, many of whom were unprepared for the change. An article in Freight Waves magazine sets it straight: “Under the new tax law, owner-operators will still be able to deduct per diem, but company drivers have lost that deduction.”
A Little Planning Goes a Long Way
Tax time is stressful enough. The idea is to make deductions as painless as possible. Digging through receipts in late March to get taxes filed by the April deadline is not the way to go. Make detailed record-keeping a priority each month to streamline the process at the end of the year. Keeping track of your transactions doesn’t have to be a cram session.
- Keep your receipts
- Use your credit card instead of cash
- Maintain a log of mileage, gas and other business purchases
- Organize records into separate folder for each month
- Know which IRS forms will help: Publication 535 and Schedules A and C are a start
- Consult a tax professional
Not sure if an expense is “significant enough” to save the receipt? When in doubt, put it in the file. Another tip: keep the originals. Scanned images of receipts are acceptable, but keep original paper copies for warranty purposes for any big-ticket items you purchase, says truckstop.com.
Invest in Helpful Tech
Trucking, like all industries, is getting increasingly upgraded technology to streamline business needs. Many trucking companies have moved toward electronic logs in their cabs to easily track hours of service (HOS) and document compliance with federal regulations of the Federal Motor Carrier Safety Administration (FMCSA).
Along with smart logbooks, truckers use a lot of handy apps in the cab, from weather reports to GPS. So, it’s no surprise that some software packages are now available to assist with the bookkeeping needs of being on the road. Fundera, a small-business financial resource and online business broker, reviewed some of the more popular software packages for truckers, some of which integrate with QuickBooks Desktop Pro.
What Makes a Business Expense Deductible for Truckers?
Let’s be honest: taxes are complicated. Many people, even business owners, don’t take advantage of itemized deductions because the rules just seem so hard to understand. And many of us are afraid of unknowingly breaking the rules – and encountering fines. That is why using a professional is so important. Truckers are no exception.
Expenses during the course of business can add up quickly and according to the Internal Revenue Service (IRS), determining which ones are eligible for deduction is pretty straightforward: “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”
These Ordinary and Necessary Expenses May be Deductible
Some expenses a trucker experiences that fall into the IRS guidelines may include:
- Vehicle expenses, parking fees and tolls
- Standard mileage rate or actual expenses
- Fuel, oil, tires
- Registration fees
- State or local government licenses and fees
- Taxes, such as the heavy highway vehicle use tax
- Insurance
- Union and trade association dues
- Travel expenses: lodging, meals (per diem), laundry cost
- Truck maintenance and repair
- Union and trade association dues
- Cost of trade magazine subscriptions
- Leasing costs
- Business phone and internet
- Uniform cost, if required to wear
- Personal care items while on the road
Not every trucker can claim every one of these deductions and there also may be even more a driver is entitled to. Some lists out there are pretty extensive and minutely detailed: check out this one on truckertotrucker.com. Because there are stringent tax rules for all of these things, it’s always best to check with a tax professional who knows the industry. In fact, if you are an owner-operator, you may even consider a service that takes care of your record-keeping and tax preparation needs year-round.
Home is Where a Deduction is
Here’s another tricky thing for truckers: in order to claim some deductions, a taxpayer needs a place to call home. Literally. Without a “tax home,” the IRS won’t allow some per diem deductions or travel expenses. And for truckers who spend weeks on-end on the road, these expenses can add up quickly.
According to an article in the Journal of Accountancy, a trucker who spent 358 days on the road in 2009, unknowing cost himself thousands of dollars due to being unfamiliar with this restriction. Because his employer didn’t require him to return home between jobs, he stayed on the road, using his mother’s address as his home base during that time. At tax time, he was disallowed $19,109 in expenses that would have been deductible, had he technically been considered “away from home.”
According to the article, the IRS instead found that the trucker “did not have a tax home and thus the expenses were not incurred while traveling away from home.” Because he did not incur maintenance expenses for his mother’s home while on the road, the Tax Court agreed with the IRS, finding that he did not have a “tax home” at all.
In order not to fall into this situation while on the road, truckers should ensure they help to maintain the property they call home. Being able to prove a stake in the residence this may mean a substantial difference in the ability to deduct certain expenses.
Owner-Operators vs. Company Drivers – Pros and Cons
in terms of taxes, owner-operators seem to have the upper hand in the number of deductions they can claim, but does that mean they win come tax time? Running a business involves a lot more than tax deductions. While being smart when it comes to taxes certainly is important, there are other factors that might aid one’s decision to drive for themselves or for a company.
Driving for a company typically means being dispatched to any job that comes up. A company driver cannot turn down a job due to preferences of time or distance. And the amount of money a company driver makes per mile is dictated by the company. However, many companies offer bonuses and are now offering “per diem” incentives to help cover the new tax changes.
While a company driver can’t take many itemized deductions, any expenses they pay for out of their own pockets and are often reimbursed by the company. With a steady and solid job outlook for truckers reported by the Bureau of Labor Statistics (BLS), company drivers have job security and can move easily between companies. Trucking companies, thus far, are always hiring good drivers.
The Advantages and Disadvantages of Being an Owner-Operator
| The Perk | The Con | |
| You own the truck | It’s all yours and can become a financial asset. | You pay for it and maintain it. Every bill is your responsibility and comes from your pocket. |
| Higher pay per mile | There’s no one setting a pay ceiling for you. And no one to split them income with. | You pay for everything for the business – and every mile you drive – out of pocket. |
| Make your own schedule | You decide when you work. You can be home when you need to and select the best jobs. | No one is guaranteeing you a certain amount of work per year. You have to find it. |
| Ensure your own safety | No one else is driving your truck. You know what happens in your truck and when. You get to maintain to your standards. | You assume all risks and responsibility. |
| Take only the jobs you want | You sign on for the work you want to do. No one dispatching you or selecting jobs on your behalf. | You must ensure you take enough jobs to cover the bills. You can’t always choose. |
As with any business or industry there are reasons to get into ownership – and those same reasons are why some people choose to be employed by a company and let someone else take on the responsibilities of ownership. It all depends on what you are looking for and, of course, what kind of cash flow you have to start – and maintain – your company.
When to Consult a Tax Professional
Truckers who wish to deduct expenses with confidence can find a lot of helpful information online. Between trade publications, industry associations and trucker-oriented tax preparation services, company drivers or owner-operators can do a lot of in-depth research on their own to prepare for tax season.
But because of the complexity of tax laws and the myriad changes that happen year-to-year, in order to get the best return on your investment, either as a driver or owner, it’s a good idea to consult a professional who is familiar with not only tax codes but also with the trucking industry.
Not sure where to start? Finding out what resources are recommended by a nonprofit association like the National Truckers Association (NMA), American Trucking Associations (ATA) or Owner-Operator Independent Drivers Association (OOIDA) is a good place to start. Such associations tend to advocate for the industry and support those within it.
How to File an Amended Tax Return
Think you’ve missed out on some important deductions in the past year or two? If, for any reason, you believe there’s been a mistake on a business tax filing, you have three (3) years from the date you originally filed the return to submit an amended return.
Most simple math errors will be caught by the IRS. But if you have new information that affects the accuracy of your return, the IRS indicates you need to refile: “If you didn’t claim the correct filing status or you need to change your income, deductions, or credits, you should file an amended or corrected return.”
Steps to filing an amended tax return:
· For sole-proprietors, a form 1040-X must be filed, along with an updated Schedule C
· Get the paperwork organized, including all of receipts and logbooks
· Check the IRS website for specific details and deadlines
How to Get Your Trucking Company Started
You don’t need a fleet of trucks to start your own trucking company. If you have your CDL, aspire to start your own business and love being out on the open road, maybe it’s time to take the leap and start your own trucking company. You’ll also need financing, dedication and, at times, thick skin.
As with any business, being your own boss brings with it risk and reward, challenge and fulfillment. And within the trucking industry, there is an additional truckload (pardon the pun) of compliance to get familiar with. Trucking is a highly regulated industry, with local, state and federal protocols, as well as frequent audits. You’ll need impeccable organization and filing skills. You don’t want to enter into your own business without knowing all there is to know.
You Don’t Have to Go It Alone
Get in touch with your local Small Business Administration (SBA). Many community colleges have centers sponsored by the SBA, that cater to new business start-ups. These centers often provide free and low-cost workshops and mentoring that can help you develop a business plan, research your industry, find funding and make connections.
Find a mentor within the industry. Know someone who’s doing it right? Get your business plan together and set up some time to get advice on getting started. You may even find a local business incubator or accelerator that houses mentors and takes on entrepreneurs in your area. As Business News Daily reports, small business incubators are on the rise across the country.
Work with one of the nonprofit trucking associations mentioned above: The National Truckers Association (NMA), American Trucking Associations (ATA) or Owner-Operator Independent Drivers Association (OOIDA). Oftentimes, these associations have some resources and education available that could give you a leg-up in learning the ins-and-outs of being an owner-operator.