If you are an owner-operator truck driver, when it is taxation time, be sure to claim all your expenses. You can significantly lower your tax liability and your taxable income by availing deductions. You can benefit from your meal allowances, you can claim write-offs on your tractors and any other equipment.
And, apart from your tax returns, you may have other reporting requirements and require to pay permit costs and additional taxes. By claiming your per diem and other truck driver tax deductions, you can reduce the amount of tax you pay. And, as an owner-operator truck driver, you should know which truck driver expenses are deductible and those that are not.
Here are the forms you need to file taxes
- A W2 form is received by company truck drivers that provide a report of the wages and income of the driver.
- These forms must be mailed to the employees by the employers by the end of January.
- This income must be reported on Form 1040 or 1040A.
- As an owner-operator, you have different options for reporting your income and can depend on your records.
- If you are working as an independent contractor for the company, you will get a Form 1099, which is utilized to report any miscellaneous income.
- In case you are a commission driver or an agent, your W2 may have the “Statutory Driver” box checked.
- Self-employed and statutory drivers must fill the Schedule C form and this is used to determine the profit and loss of the business.
The 15 Tax Deduction Truck Drivers Can Take
Truck drivers are allowed to deduct business expenses that are “regular and necessary” by the IRS. While these expenses vary as per the individual, some expenses are standard.
1) Meal Expenses
You can deduct the cost of your meals that you incur when you are at work, away from home. For this, you must save your meal receipts. Or, you can deduct the standard meal allowance that is stipulated by the IRS for the transportation industry and make use of your log books as proof.
For the years 2016 and 2017:
- The incidental and meal expenses per day are $63, irrespective of whether you use the standard or the actual expense method.
- Only 80% of the total expenditure incurred for the entire year is deductible.
- And, although only 80% of the amount is deductible, you should keep track of all your expenses for purposes of tax, since the 80% adjustment is usually made when the tax return is prepared.
- When you are traveling on work, if you stop for rest so that you can perform your work properly, then the meals are deductible.
2) Lodging Expenses
Expenses that are incurred for lodging are deductible. However, there is no standard lodging allowance and so you need to keep your receipts for each lodging expense incurred. In order to claim lodging expenses, you need to stay away from home overnight.
Your lodging or any other travel expense can be disallowed if you don’t have a place of residence or a proper place of business, in which case, you would be considered to be a transient or itinerant and your place of work will be considered as your home for the purpose of taxation. However, as an itinerant, you cannot claim any meals or lodging deductions, as you would never be considered to be away from your home.
3) Miscellaneous Expenses (On the Road)
To be deductible, the expense of the items should be ordinary, as well as necessary for the job. These expenses include items like log books, tools, cargo straps, safety gear, CB radios, GPS units, etc. Usually, for any of these expenses, receipts are needed; however, if the expenditure incurred is less than $75, then a receipt is not required. But, you must keep a record of all the purchases in a diary in a proper manner.
4) Personal Electronic Device Costs
Electronic items such as cell phones and laptops are included in these expenses; however, since they can be used for personal purposes also, only 50% of the monthly fees can be deducted. If the devices are used for purposes of work, then the entire cost of the device can be deducted.
5) Maintenance Expenses
You can deduct the expenses incurred on truck maintenance and purchase of supplies such as the cost of new tires, oil change, cleaning supplies, washer supplies, etc. if you pay out of your pocket. However, if your employer reimburses you for these expenses, you cannot claim a deduction.
6) Professional or Union Association Fees
If you pay any fees as a member of any trucking industry organization or the union, you can deduct 100% of these expenses from your income that is taxable.
7) Uniform Expenses
If you require wearing a uniform when you’re on work and your employer does not pay for the uniform, then the expenses incurred to buy uniforms is deductible. This expense also includes protective boots, goggles or gloves. Any laundry expenses incurred while you are away from your home on work is also deductible.
8) Office Supplies Expenses
Expenses incurred on the purchase of office supplies that you use for your work (to keep track of your day or route) such as writing supplies, log books, clipboards, staplers, route maps, etc. are tax-deductible.
9) Sleeper Berth Expenses
If you make use of a sleeper berth while you’re away on work, then items like your bedding, alarm clock, cab curtains, first aid supplies and mini refrigerator are all expenses that are deductible.
10) Work-Related Expenses
Any expenses that are related to your work are tax deductible such as:
- Fees for driver license renewal.
- Fees for DOT physical exams.
- Fees for drug testing.
- Cost for sleep apnea study.
11) Truck Operating Expenses
Expenses incurred to operate the vehicle such as fuel, insurance, licenses, maintenance and taxes are all deductible and depending on the cost, some of the expenses can be depreciated.
12) Vehicle Cost Write-Offs
According to the tax code, there are many options that allow writing off the cost of the truck.
- You can also immediately expense the vehicle up to an amount of $510,000 in the year that the asset is put into service.
- You can depreciate the cost of the vehicle in the 1st year by 50%.
- Avail normal depreciation.
- Or a combination of all the above options.
These allow the owner-operators to pick any amount to write-off as per their convenience. The IRS permits a recovery period of:
- 3-year period for over-the-road tractors.
- 5-year period for heavy-duty trucks (more than 13,000 lbs), trailers and trailer-mounted containers.
These deductions are applicable for common people, but they are also applicable to truckers.
13) Child and Dependent Care Expenses
This enables you to recover some expenses that you may have incurred for the care of a child or dependent. To qualify for the credit the child must be under 13 years; however, in the case of disabled spouses or children, the eligibility is regardless of the age.
14) Child Tax Credit
You could claim a credit for an amount of up to $1,000 for every child under 17 years of age living with you and more than half of the child’s living expense must be borne by you.
15) Earned Income Tax Credit
This refundable credit is based on your income and provides reduced tax liability of around $6,000 or more. This was developed originally for workers with a low income but has been not extended to middle-class families and individuals.
Some expenses do not qualify for deductions such as:
- Street Clothing: Only the cost of protective clothing or uniforms is permitted as a deduction.
- Lost Income: Lost income does not require to be reported on the tax return, as it is accounted for. Examples of instances that cause loss of income are:
- Time spent to repair or maintain your equipment.
- Because of a deadhead.
- And, taking these deductions can cause IRS audits and inquiries.
As an owner-operator truck driver, you incur several expenses. However, if you don’t claim all the expenses, you may end up paying more tax than necessary. These expense lists are regarded as itemized expense lists instead of a standard expense list. If you itemize all your expenses, you can claim more by the way of deductions. However, you need to keep all the receipts and organized records of your expenses. You could avail the services of a specialist in tax preparation, who can help you file your returns and get your money back.