We originally published this article quite some time ago on a sister site. With tax time approaching again this year, we are re-publishing this article which addresses basic truck driver tax planning and tips about deductions, expenses and planning for your financial security.
The trucking industry provides a great opportunity for men and women who want to be self-employed as owner-operator truck drivers as well as truckers who want to be company drivers. And regardless of which you are, it takes a special person to be able to handle the stress and demands of the lifestyle of a tractor trailer driver.
Whether you are self-employed and own your own rig, or you are a company driver, tax planning and learning to manage your money is crucial to your success. As with any business you will have to deal with taxes, and accurate record keeping of your income, expenses, and tax deductions is critical in helping to reduce your tax burden and plan for your future financial security. The following information is a basic truck driver’s expenses and tax guideline. It is not meant to replace the benefits and expertise of using a tax preparer. Using the services of a tax preparer who is familiar with the trucking industry is very important and very much to your benefit.
Keeping track of your costs and learning where you can reduce spending is essential. Take the time to prepare and write down a budget and a system for keeping track of your income and expenses. Use a pre-planned itemized worksheet listing tax deductions for tractor trailer drivers, or design your own.
Determining your minimum cost to operate is the first step; know your expenses so that you:
- avoid being caught off guard and can plan for emergencies
- put 10% of your gross income aside for emergencies
- remember to allow for planned and unplanned maintenance
Tax deductions are defined as ordinary and necessary expenses incurred during the conducting of business. Simply translated, this means that extravagant or useless expenses will not qualify as being a legitimate deduction.
Your tractor trailer ….
The most obvious class of deductible expenses includes:
- maintains, fuels or otherwise directly keeps the truck and its accessory equipment operational
- diesel, oil, coolant, tires, replacement parts
- fees or charges relating to servicing installation or delivery of these
You … the tractor trailer driver ….
Many costs associated with traveling away from home are also deductible. One of the biggest deductions for an over-the-road trucker is the meal per diem rate, which can vary from state to state.
Most otr truck drivers are home only 3-4 days a month. That leaves about 320 days a year for the average OTR driver that you can claim meals at a per diem rate which approximates about $18,880 that you can write off on your taxes. Over-the-road drivers who are away from home for days at a time can claim a standard meal deduction on their taxes. The current rate for DOT regulated workers is $59.00 daily, but is subject to change by the IRS at any time.
If you were home for part of the day that you started or finished a haul, this amount can be prorated. Other deductible costs directly related to you include:
- paying for shower facilities, laundry
- work clothing, boots,, gloves and other safety equipment
- equipment and supplies geared towards the business side of trucking
- office supplies such as laptops, staples, forms, pens, log books
- maintaining an office in your home that meets the requirements of the IRS as a designated area
- equipped with a desk
- equipped with a computer
- equipped with a phone, etc.
- discuss this with your tax preparer
Other deductions ….
Some deductions are contingent on whether you are employed as a company driver or you are an owner-operator. As an example, if you are an employee and receive per diem for meals, you cannot claim a per diem deduction for meals.
As an owner-operator, you can deduct any expense for repairs to your rig. However, if you perform repairs yourself, you can deduct the expense for parts but not for your time.
Owner-Operators cannot deduct:
- the time you incur from working on your own equipment
- the income lost as a result of unpaid mileage
Any expense incurred from the use of lumpers (workers who load/unload the truck) is deductible. However, only the person or company incurring the expense can deduct it. You can deduct the entire pay of lumpers directly employed by you, but only the portion of their pay that you cover if their wages are jointly paid by you and a client.
A word of caution: don’t fall into the trap of trying to claim too much and unfortunately triggering an audit. Here are some non-deductible expenses that most truckers need to leave off:
- expenses that were or will be reimbursed by your employer
- clothing that is adaptable for everyday wear
- commuting costs such as tolls, gas, parking
- home phone line
- interest on personal loans
- personal vacations
- student loan interest or student loan principal
Keeping your truck driver records ….
A good record keeping system doesn’t have to be complicated, but it does need to be organized. It has to be accurate and reflect what you spend and what you take in. Bookkeeping is nothing more than grouping and summarizing all your income and expenses.
To help you record your income and expenses you can make your own worksheet. All you really need is an accountant’s pad available in any office supply store. Remember, this purchase is a tax deduction ! Simply list each month across the top of your Worksheet and all your costs.
First list “fixed costs” that remain the same month to month or year to year, such as:
- truck payment, truck insurance, medical insurance
- licenses, permits
- highway use tax
- preventative maintenance, etc.
Next, list your “variable costs” such as:
- fuel, fuel taxes
- tools, supplies
- telephone, repairs
- parts, etc.
Project out for a year what you think your costs will be then keep a second worksheet with your actual costs each month. Then compare the difference to see if you can rely on your projections. Being able to accurately project your future income and expenses is a tremendous help for tax planning and business management purposes. Next, your should record your monthly income on the worksheet.
Calculating your cost per mile – planning can make the difference between success and failure ….
Knowing your cost per mile (cpm) is very important. Be sure to keep track of your miles each month and calculate your cpm by dividing your costs by your number of miles. Determining the cpm is a good way to keep track of how well you are doing. Proper realistic planning can and does make the difference between success and failure.
Once you have your system set up you should send your records to your tax preparer on a regular basis. Using a tax preparer who is very familiar with the trucking industry is very important. There can be variables, and a tax preparer knowledgeable about the trucking industry will be on top of changes made to tax laws that affect truck drivers.
It’s a good idea to send your records to your tax preparer on a quarterly basis, which is probably the best way:
- you will be informed of your current tax situation regularly throughout the year
- you can get help with planning and avoid surprises
- you can be continually guided and updated with your financial questions and status
- you can avoid penalties
The trucking industry has become more and more complex. And truck driver tax laws have become more complex. An expert who knows trucking can provide you with the best advice concerning:
- methods of depreciating equipment
- options about equipment purchase and/or lease
- changes in the tax laws that affect the trucking industry and will affect you
Further Sources …
Sources of information for this article were provided by: