When tax season approaches, it’s time to get your finances in full order. If you’re a truck driver, however, you should also know about certain tax reductions or tax deductions that might help you save quite a bit of cash.
The right tax reductions can even result in a federal tax refund, allowing you to pocket extra cash to funnel back into your business. If you’re not sure where to start, read on.
We’ll take a look at some of the most important tax reductions for truck drivers you should know about.
Who Can Claim Truck Driver Tax Breaks?
Simply put, any self-employed truck driver can claim truck driver tax breaks or reductions if those expenses are directly related to their work. It’s all thanks to the Tax Cuts and Jobs Act.
More specifically, you have to be either an owner-operator or a contract driver, not a driver for a specific company. If you're a trucking owner-operator, you'll receive a 1099-NEC form at the end of the year from each customer who paid you more than $600 over the year.
You can use these 1099s in addition to your own income and expenses records to report all of your trucking income and expenses on Schedule C of your tax form. Once you do that, you can claim certain expenses related to your business. Those expenses will then reduce your taxable income for the year.
If you’ve been paying quarterly taxes (as you should as a self-employed individual), that means you may receive a federal tax refund! In essence, tax deductions reduce your gross income, potentially putting you into a lower tax bracket or showing the government that you paid more taxes than you should have.
On the other hand, if you’re an employee of a trucking company and get a W-2 from that company, you can't deduct any of your job-related expenses. That's because those deductions and savings are automatically baked into the taxes that get taken out of your paycheck each month.
What Tax Reductions Can Truck Drivers Receive?
As a self-employed truck driver or owner-operator, you can take advantage of several tax reductions by claiming costs and purchases as business expenses.
Here's a breakdown of the reductions you should try to claim to maximize your tax refund.
Medical Costs and Insurance
Firstly, any medical costs and insurance payments you have to make that are related to your business may be deducted on your tax form. Truck drivers like you have to get regular medical exams as a necessary condition to do your work.
Any out-of-pocket expenses you pay, like deductibles, are business expenses you can claim on your tax return. However, note that other regular medical expenses, like medications or doctor/hospital visits, are deductible only if you itemize them on Schedule A.
In addition, you can claim your insurance as a necessary expense for doing business. For example, you must maintain commercial auto liability insurance and property damage insurance on your truck. You might also purchase optional insurance to cover lost income for business interruptions or lost cargo.
You can deduct your monthly insurance premiums as business expenses if you have any of these insurance packages. For example, if you pay $200 per month for your combined trucking insurance, you can deduct $2400 from your tax return.
Association Dues
Many truck drivers, particularly self-employed drivers or owner-operators, are part of unions or trucking associations. You can deduct any fees for trucking associations or unions if they're required for your business or intended to help your trucking career. Keep track of these annual or monthly dues to deduct them from your taxes.
Licensing Fees
Many truck drivers pay for specialized training to maintain or acquire a CDL license or additional certifications. If you had to pay any licensing fees over the last year, you could deduct the costs for those fees from your gross income.
According to the IRS, these are necessary expenses for doing business since you need certain licenses to drive legally as a truck operator.
Travel Costs (Fuel and Meals)
Here’s a big deduction you should definitely try to take: travel costs.
Truckers are on the road a lot, so they have to pay a ton of money for fuel and meals. Fortunately, the IRS considers any meals you eat while on the clock a deductible expense. For example, if you pick up some lunch in the middle of an 11-hour workday, you can deduct the cost of that lunch as a necessary expense.
The same goes for any fuel you purchase for your truck. All of it can be deducted from your gross income at the end of the year.
Of course, you’ll also need to carefully track your fuel and meal purchases. It’s a good idea to put all this information into software or write it down in a journal with associated receipts.
That way, if the IRS ever audits you, you’ll be able to prove that you paid however much you claimed in terms of fuel and on-the-job meals.
Personal Devices
You can deduct the cost of your personal devices, including your cell phone, phone plans, GPS software, and other work software or computer equipment needed to operate your business.
For example, say that you purchase a new phone that you exclusively use for work. You also purchase a new laptop to manage your clients and run your business more efficiently. You can deduct both of these expenses from your tax return, provided that you keep the receipts and only use the equipment for your business.
Remember this point above all else. If the IRS finds out that you use your “work phone” for things aside from work, like keeping up with your friends, it could penalize you since you technically aren’t using the phone as a business-exclusive device.
Truck Repairs and Maintenance
Lastly, you can and should take tax reductions for truck repairs and maintenance fees. After all, your truck is an important part of your business; you need it to work properly to make any money.
Regular truck repairs and maintenance fees, like changing tires, changing the oil, or repairing issues with the engine, can all be claimed as business expenses. That also includes tolls and toll fees, plus equipment depreciation (for example, if you buy a new truck as an independent contractor and expect vehicle expenses to gradually reduce its value).
Keep track of any maintenance or mechanical fees or costs you incur throughout the year, including purchasing maintenance tools or supplies for you to use personally. For instance, if you pick up some WD-40 for maintenance on your truck, you can claim that expense at the end of the year.
This highlights the importance of keeping careful, detailed records of all your expenses as a trucking business owner or self-employed driver. Record your expenses, subscriptions, and per diem rates in your logbook or another central resource.
What Expenses Are Not Deductible?
While the above six expense types are deductible from your gross income, some are not. There are common costs that you have to pay to drive a truck that aren't directly or exclusively related to your trucking business but which aren't deductible, including:
- Your home phone line
- Any travel expenses or meals you pay for on personal trips
- Any reimbursed expenses
- Clothing that’s appropriate for everyday wear
- Any commuting costs, including gas, car insurance, etc.
If you're unsure whether one expense or another is deductible, consider whether the IRS would count it as "ordinary and necessary" for your business. Remember, any expense you do try to claim as business-related needs to have a record, like a receipt or other paperwork.
For instance, if you get cleaning supplies for your truck, mark those supplies as just for work, like work-only meal expenses.
You also can’t take the standard deduction tax credit if you itemize your deductions like this. That can still be smart, but keep it in mind if you’re not a company driver. Tax calculators and tax professionals can help you determine if filing taxes this way is wise or if you should file taxes differently, especially when accounting for self-employment tax.
Conclusion
Combined, these six tax reductions can save you quite a lot of money, helping you make the most of your yearly budget. But accounting for all your expenses can be easier said than done.
RPM helps truck drivers like you keep full track of daily expenses, plus connect drivers to worthwhile clients so you can keep the money flowing all year round. Contact us today to learn how we can help you take your truck driving career to the next level as your carrier network.
Sources:
What You Need to Know About Truck Driver Tax Deductions | TurboTax Tax Tips & Videos
Tax Deduction Definition: Standard or Itemized? | Investopedia
About Form 1099-NEC, Nonemployee Compensation | Internal Revenue Service
