Tax Deductions Tips for Owner-Operators

Managing your taxes is one of the biggest challenges of operating an owner-operator trucking business. For your business to thrive, you must understand state and federal taxes and how to minimize your tax liability by claiming tax deductions. Managing your taxes is more than a regulatory requirement — it’s critical to keeping of your hard-earned money in your pocket. Each deduction you claim can lower your taxable income and raise your profits.  

Being aware of owner-operator tax deductions, combined with good planning and recordkeeping throughout the year, helps you steer clear of any surprises during tax season. In this guide, we’ll cover estimated tax payments, tracking business expenses, and how to take full advantage of available write-offs as a self-employed owner-operator. 

Note: This article is for general purposes only and is not a comprehensive guide on tax deductions. Refer to IRS regulations and consult a tax professional for official tax guidelines.

Types of taxes for owner-operators

Owner-operators are subject to the following types of taxes.

Self-employment taxes

Owner-operators are responsible for paying Social Security and Medicare taxes directly to the IRS. Company drivers already have these deducted from their paychecks. The estimated self-employment tax rate is 15.3% — 12.4% for Social Security and 2.9% for Medicare.

Federal and state taxes

Owner-operators are also responsible for estimating and paying state and federal income taxes if applicable in their home state. If you think your tax liability will be $1,000 or more after accounting for withholding and credits, making estimated quarterly tax payments is advisable. Be sure to check your state tax laws and determine whether you must also pay county income tax.

Typical tax deductions for owner-operators

Your trucking business expenses are deductible, but only if you keep a record of them. They must also be considered ordinary and necessary. Here are common deductions for owner-operators.

1. Insurance 

Insurance-related costs related to your business are a main owner-operator tax write-off. You can write off premiums for various types of coverage, from cargo insurance to commercial liability and health insurance premiums. For example, if you pay $1,200 annually for liability insurance, you can deduct that amount from your gross income when filing taxes, which lowers your tax liability.

2. Communication 

If you have a phone line specifically for your trucking business, you can write off the full expense of the plan. If you use your personal phone for business purposes, calculate the percentage of business use and deduct that portion. Say your monthly plan costs $60, and you use it 70% for business. You can deduct $504 annually. You can also deduct apps or software you subscribe to that help with navigation or load boarding. 

3. Fuel and maintenance

Keep detailed records of your fuel purchases and maintenance expenses, since you’re allowed to  deduct the total amount spent on these costs. That includes the costs of oil changes and tire replacements. For example, if you spend $15,000 on fuel and $2,500 on maintenance, both amounts are deductible. Using a dedicated fuel card can simplify tracking these types of expenses.

4. Equipment

Under Section 179 of the Internal Revenue Code, you can deduct the total cost of qualifying equipment — including trucks — in the year it is purchased if it meets specific criteria. If you buy a truck for $50,000, you might be able to deduct the entire amount in the first year. You can also deduct any tools or equipment you use for your business, such as GPS devices, as long as they meet the necessary criteria.

5. Education and training 

Investing in your education and training is beneficial for your career and tax-deductible. You can claim costs for truck driver school, safety courses, and training to maintain your commercial driver’s license. For example, attending a $500 safety course can be deducted, as it directly relates to your business operations.

6. Per diem

You can also claim per diem expenses for meals when you’re on the road. The IRS allows you to deduct 80% of your per diem rate, which for 2024 is $80 per day. If you’re away from home for 10 days, you could claim $640 for meals ($80 x 0.80 x 10). Keeping all receipts and travel documentation for at least three years is good practice, even if you stick to the per diem allowance.

7. Other business expenses

You can also deduct any interest you pay on business loans throughout the year and depreciable property. If you have a home office, you might qualify for a deduction. This lets you write off a portion of your home expenses — such as utilities, rent, and internet — based on the size of your dedicated workspace and the percentage of your square footage used for business purposes.

Other owner-operator tax write-offs include the following:

• Retirement plan contributions
• Startup costs
• Supplies
• Permits and license fees
• DOT physical exam costs
• Travel
• Truck lease
• Accounting services
• Truck repairs and accessories

If you don’t file a tax return or show any owner-operator tax deductions, the IRS will determine the amount of taxes you own without considering any tax deductions. The IRS estimate is typically higher than what you would owe if deductions are applied.

Common tax myths — BUSTED!

How to document your deductible business expenses

To claim owner-operator tax deductions, you need to keep good records. Without documentation, you could be at risk for an audit.

Follow these tips, and you’ll have what you need to claim deductions as an owner-operator:

1. Create digital copies: As you collect receipts, create digital copies. That can be as simple as taking a picture of receipts and storing images in a folder. Keep the physical receipts, too, as a backup. 
2. Collect receipts for credit card charges: Don’t forget to collect receipts for lumper fees or other business expenses charged to your credit card. This includes tolls, weigh station fees, and any essential technology for running your business. Many owner-operators have two credit cards — one for business and another for personal use — to track their spending. 
3. Keep all records starting with electronic logging devices (ELDs): Keep all records that support every deduction you claim on your tax return, beginning with your ELD logs. You’ll need those for your per diem deductions, which we’ll explain in the next section.
4. Leverage technology: Leverage technology for accurate recordkeeping. You might be able to link your fuel card app to your accounting software or use a business management platform with real-time expense tracking. These records can then be easily accessed at tax time. 

How to claim per diem business expenses

Per diem (per day) expenses are the tax-deductible amount the IRS allows you to spend on meals, beverages, and tips while you’re away from home for work. The maximum allowable per diem full-day rate for the 2024 tax year is $80, of which you can claim 80% or $64. 

Owner-operators deduct per diem expenses on IRS Schedule C, which reduces self-employment business taxes and income taxes owed on the return. Over-the-road owner-operators away from home much of the year can maximize savings using the per diem allowance.

Even if you use the per diem allowance, it’s smart to keep all receipts and travel documentation for at least three years. It’s also important to realize that you can’t deduct your total per diem from your tax bill, dollar-for-dollar.

How to claim depreciation

As mentioned, Section 179 of the Internal Revenue Code allows taxpayers to deduct certain property as an expense if they use it in service. This applies to your truck if you own it. “Straight-line” depreciation is the standard depreciation schedule for a new Class 8 truck. The IRS spreads this deduction evenly over several tax years.

You should also consider a variation of the multi-year formula known as accelerated depreciation, which takes a percentage of the equipment’s value in a couple of years and then a lesser rate afterward.

Truck owners and leasers might be able to deduct other vehicle costs from their taxes, such as:

• Fuel expenses
• Insurance
• Licenses
• Maintenance

Depending on the type and cost, you might be required to depreciate some expenses. For more information, see IRS Publication 946: How to Depreciate Property.

How to minimize your taxes

Here are some tips to reduce your taxes:

• Consult a professional: Get help from a tax professional or business services provider specializing in owner-operator taxes. These services typically save you more money in deductions and other tax loopholes than you pay for their expertise, so it’s a good investment.
• Save tax-free money: Save money tax-free by regularly contributing to an individual retirement account, simplified employee pension plan, or 401(k). A portion of your contributions are tax-exempt until you start drawing on them.
• Track personal vehicle miles: Commuting to and from work isn’t an allowable business expense. However, you can deduct the mileage if you drive for work-related errands, such as going to the bank, meetings, or trucking events.
• Look for tax credit opportunities: You can receive tax credits for paying tuition — for yourself or your children — at qualified educational institutions.

If you need more detailed tax guidance, you can also refer to the Trucking Tax Center at the IRS.

What to know about IRS audits

Claiming significant expenses uncommon for a single-truck owner-operator may raise red flags and trigger an IRS audit. Typically, the IRS has up to three years to request an audit for any deductions or taxable income reported on your tax return. It’s advisable to retain your records for at least that duration in case needed.

If the IRS audits your return, that doesn’t mean your accountant made a mistake. The IRS randomly selects some returns to determine compliance with tax rules. Most auditing of the self-employed involves verifying expenses. Contact the person who prepared your return if you receive an audit notice. 

Maximize deductions, minimize tax stress

Taxes don’t have to be a struggle for owner-operators. The key to success is maintaining good records and tracking owner-operator deductions throughout the year. You might also consider hiring a tax professional to ensure you get the maximum allowable truck driver tax deductions — but don’t wait until tax season! Find a tax pro well before it’s time to file taxes.

If you want to save time and money, automate the processes with a transportation management system (TMS). The Truckstop TMS, ITS Dispatch is an affordable way to organize and run your business while saving time and money. Get started and request a demo today.