Owner operators in the trucking industry are benefited from various allowances by the government like meal allowance, lodging, additional permit costs exceptions or even special reporting requirements in addition to your tax returns to name a few. Here are some details on the deductions that you can avail as an owner-operator trucker:
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Tax deduction for the meals on your trip: You may deduct actual cost of your meals when you are away from your home on a business travel. All you need to do is to save your receipts. You might even deduct the IRS standard meal allowance using your logbook as evidence. The maximum amount allowed for the meal deduction is $63 per day for the year 2017. You can use standard method or the actual expense method, only 80% of the total for the year is deductible. You need to keep track on all the expenses for tax purposes, as the 80% adjustment is made during the tax-return preparation process.
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Tax deduction for lodging: As an owner operator, your lodging expenses are also deductible. You need to keep the receipts of every temporary accommodation you take as there is no standard allowance or per diem rates for lodging. You must be away from home over a night to take the tax benefits for lodging. Have a place of work and residence is required to deduct lodging. If the condition is not met then you risk the loss of your lodging and meal allowance. If you are an itinerant, that means if you do not have a particular residence or place of work, then you will not be able to claim a deduction. In such cases you are never considered away from home and so the deduction will not be granted.
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Tax deduction for other expenses made on-the-road: There are some other expenses that are deductible like laundry (when away overnight), gloves, logbooks, maps, cell phones, CB radios, tools, safety gear, cargo straps, weigh tickets(if not reimbursed) and any other incurred expenses that are ordinary and necessary in due course of business. Receipts are required for all of these expenses if it is more than $75. You should timely enter all your expenses in a diary to avoid any inconvenience later while filing your return.
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Tax deduction on vehicle cost: The present tax code gives a few alternatives to writing off the cost of a vehicle, including immediate expenses of up to $510,000 (starting at 2017) amid the year the property is put into service; first-year depreciation equivalent to half of the vehicle’s cost; ordinary depreciation; or all of the three. These choices enable owner-operators to pick any amount of discount to best suit their specific conditions. For normal depreciation, the IRS permits a recovery time of 3 years for over-the-street tractor units and of 5 years for trailers, trailer-mounted compartments and heavy-duty trucks (13,000 pounds or more).
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Tax deduction for general business expenses: As an owner-operator, you can deduct these expenses: business-related subscriptions, association charges, computers and software installation expenses, Internet service payments, cleaning and office supplies, drug testing, sleep apnea studies, postage and other business-related costs. The tractor operating expenses are also deductible – Depending upon the nature and cost, a few expenses may be depreciated like fuel, licenses, taxes, maintenance and insurance.
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Tax deduction on the use of heavy vehicle: The heavy highway vehicle use tax (Form 2290 of the IRS) applies to the highway vehicles that weigh 55,000 pounds or more. The due date for this form depends on when the vehicle is first used on an open highway during the annual filing time. The use tax ranges from $100 to $550 per vehicle for an entire year, depending upon the vehicle’s weight. If you have used your vehicle for the first time in July, the form has to be filed in the end of August. Usually, the tax is prorated and is due by the last day of the month following the month the vehicle was first used. You should have an employer ID number to document the Form 2290; your Social Security number can’t be given as the ID number.
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Tax deduction for subcontractor payments: If you have made a payment of $600 or more to your subcontractor, you have to file form 1099 MISC. You would need to provide the subcontractor’s name, address, tax ID number and the payment amount in the form. You need to fill this form timely and properly to avoid penalties. The form 1096 and 1099 are due to IRS and sub-contractor on January 31 of the following year of payment.
Some expenses are non-deductible like street clothing however, the cost of uniforms or protective clothing is allowed as a deduction. You need to be really careful while claiming the deductions.
It is better that you take help from experts by calling us so that you do not end up with unnecessary IRS inquiries and triggers. We have a team of professionals that can help you with Tax Services, 2018 Tax Reform – Business Interest Deduction, Net Operating Loss, 1031 Exchange, Meals and Entertainment, Payroll Services, or Advisory And Valuation Services.
Also read Deductions on International Moving Expenses and Reimbursements
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