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An Owner-Operator’s Guide to Tax Deductions

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Managing your taxes is one of the biggest challenges of operating an owner-operator trucking business. To succeed, you need to understand how to calculate and pay taxes to state and federal agencies and minimize your tax liability by claiming tax deductions.

Being aware of owner-operator tax deductions, combined with good planning and recordkeeping throughout the year, helps you avoid unexpected surprises during tax season.

In this guide, we’ll cover estimated tax payments, claiming tax deductions, and tracking business expenses 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 these types of taxes:

Self-employment taxes

Owner-operators are responsible for paying Social Security and Medicare taxes directly to the IRS, rather than having these deducted from your paycheck if you’re employed as a company driver. The estimated self-employment tax rate is 15.3% (12.4% for Social Security and 2.9% for Medicare).

Federal and state taxes

In addition to self-employment tax, owner-operators are responsible for estimating and paying federal and state income taxes if applicable in their home state. If you think you’ll owe at least $1,000 after subtracting withholding and credits, making estimated quarterly tax payments is advisable. But be sure to check your state tax laws and determine whether you must also pay county income tax.

Typical tax deductions for owner-operators

Common deductions for owner-operators include:

  • Interest paid on business loans
  • Depreciable property
  • Home office
  • Insurance premiums
  • Retirement plan contributions
  • Startup costs
  • Supplies
  • Permits and license fees
  • DOT physical exam costs
  • Travel
  • Truck lease
  • Accounting services
  • Communication equipment
  • Truck repairs and accessories

Expenses are deductible if you have a record of the expense and if it is considered an ordinary and necessary business expense.

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

Common tax myths — BUSTED!

Myth Reality
“In the year you start your business, you will owe no tax.” This is not true, especially if you’re leasing your truck.
“You can deduct deadhead mileage and days off because of illness.” You can’t deduct deadhead miles, but you can deduct costs related to deadhead miles — fuel and tolls, for example.
“You can deduct the cost of your dog.” This is partially true. If your dog is a “security measure,” you may be able to deduct some of its care costs like veterinary care and food.
“You must file your business as a corporation.” Not necessarily. Incorporation only makes sense when the tax savings exceed the added costs.
“You can negotiate a deal with the IRS to pay back taxes at a few cents on the dollar.” The IRS may grant “Offers in Compromise” only under specific circumstances.

How to Document Your Deductible Business Expenses

To claim owner-operator tax deductions, you need 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. 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. Don’t forget to collect receipts for lumber 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 better. 
  3. 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 for accurate recordkeeping. You may be able to link your fuel card app to your accounting software or use business management platforms 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 2023 tax year is $69, of which you can claim 80%, or $55.20. 

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, keeping all receipts and travel documentation for at least three years is good practice. 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

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 may be able to deduct other vehicle costs from their taxes, such as:

  • Fuel expenses
  • Insurance
  • Licenses
  • Maintenance

Depending on their nature and cost, you may have 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:

  • 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.
  • Save money tax-free by regularly contributing to an IRA, SEP, or 401(k). A portion of your contributions are tax-exempt until you start drawing on them many years later.
  • 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 truck shows.
  • 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 CPA 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.

Make truck driver tax deductions work for you

Taxes don’t have to be a struggle for owner-operators. The key to success is maintaining good records and accounting for owner-operator deductions all 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 within your business with a Transportation Management System (TMS). Truckstop’s TMS is an affordable way to streamline and optimize your business while saving you time and money.

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