It is that time again. It is time to begin thinking about filing your taxes. As an owner-operator, you are considered self-employed or an independent contractor. This opens the door for many tax deductions. Knowing which deductions available for owner-operators can help you get the most out of owning your own truck. Tax time and filing can be a headache but being prepared can help minimize that headache.
Continue reading below where there are a few common questions regarding tax deductions for owner-operators and tax deduction reminders.
Owner-Operator Tax Deduction Questions
Q: What tax forms do owner-operators need to file?
A: The carrier in which you haul for will send you a 1099 form that reports all earnings from that trucking company. If you carry for multiple carriers, each carrier will send you a 1099 form. You will then file a 1040 tax form. Owner-operators who own more than one tractor-trailer and employ drivers to operate them, they will need to send each employee a W-2 tax form.
Q: How much money should an owner-operator set aside for business taxes?
A: Tax experts suggest that an independent contractor should set aside twenty-five to thirty percent of their quarterly net earnings.
Q: What happens if an owner-operator does not pay their quarterly taxes?
A: When an owner-operator does not pay part or all of their quarterly taxes, the owner-operator may be subject to the Internal Revenue Service (IRS) imposed tax liabilities, penalties, and interest charges.
Q: Do owner-operators receive a tax return?
A: Most commonly, no, owner-operators do not receive a tax return. If an owner-operator does receive an income tax refund, it may mean they paid more on their quarterly taxes throughout the year.
Typical Owner-Operator Tax Deductible Expenses
Many business owners overlook the expenses that can be used as a tax deduction. Keep in mind anything needed for you to complete your job, work-related expenses, or owner-operator business is often qualified to use as a tax deduction or job-related expense.
E-log statements can be used to calculate taxable Per Diem
You must ask your carrier to send you a quarterly statement; most do not do this without it requested. It is also wise to keep track of Per Diem pay; by marking a calendar of days in which you received Per Diem for full days’ away on the road.
Wearing carrier required uniforms is tax-deductible.
For a uniform to be tax-deductible, it must be a requirement of the contracted carrier. The cost of care and cleaning required uniforms is often a deductible expense.
Owner-operator’s business banking expenses count as deductions.
This includes business-related credit, or debit card purchase fees, and ATM fees. It also includes account charges related to your business checking or savings accounts.
Owner-operators should always keep separate banking accounts, credit cards, and checks for all business expenses. Do not mix business accounts with a personal account. This can save you time sorting business expenses at tax time.
The expenses of purchasing and using a cell phone, pager, or other communication device are considered tax-deductible for owner-operators. However, you must keep a detailed record of all business calls. This includes the phone number, name of the business, and the reason for the call.
Satellite radio is often a tax deduction for owner-operators.
Satellite radios can be deductible for owner-operators because you can use them for traffic updates and weather reports. Both methods are considered essential to the operation of a truck.
Individual retirement plans qualify as a tax deduction.
If you lease your tractor-trailer or another company vehicle, the full expense is tax-deductible.
Tax deductions for tractor or trailer damages.
Tractor or trailer damages can include theft, damage from a wreck, fire, or weather.
Over time your truck, trailer, and any device you use to run your trucking business will depreciate. This depreciation is a tax deduction and includes all equipment used specifically for your trucking business purpose, such as computers, vehicles, buildings/shops, furniture, and tools.
Insurance is also an owner-operator contractor tax deduction. This includes medical, dental, vision, life, employee, and vehicle, and property insurance coverage.
A portion of your health and medical expenses is deductible. However, your medical bills can only be deducted if the total medical expense is ten percent higher than your annual gross income.
A portion of gym fees may also be tax-deductible if a doctor has ordered exercise for physical rehabilitation purposes.
Business entertainment. Anytime you take a client, or employee out to dinner to discuss business, as an owner-operator you can deduct the full amount of the ticket. Make sure to keep the receipts and write down a detailed account of the business discussed. This deduction applies to company parties, luncheons, or any entertainment you pay for that is work-related.
Owner-Operator Taxes – Final Tips
There are a few tax deductions you may want to remember if you recently became an owner-operator or considering owning your own truck.
Save your fuel receipts and record the miles you drive. In addition to mileage, you can deduct toll expenses, travel expenses, parking fees, and meals while you are on the road.
Above is not the full list of tax deductions for owner-operators. However, it is important to keep track of all business transactions, even the small ones, as you may be able to claim them.
Every expense you can deduct will help bring down your taxable income. The more you able to take off the taxable income, the less you will have to pay the IRS. Hiring a CPA can help you find all the deductions available to you if you keep your records straight and accurate.