It is that time again, time to start thinking about taxes. Being an owner-operator is considered self-employment, or independent-contractor, which opens the door for many tax deductions. Knowing the deductions you can use as an owner-operator is essential to helping you get the most out of owning your truck. Tax time and filing can be a headache, but being prepared can help minimize that problem.
Read below where there are a few of the most common questions about tax deductions for owner-operator truck drivers and tax deduction reminders.
Q: What tax forms do owner-operators need to file?
A: The carrier that you haul for will send you a 1099 that reports all earnings from that trucking company. If you haul for multiple carriers, each carrier will send you 1099. You will then file a 1040 tax form. For 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 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 neglects to pay partial or all or their quarterly taxes, they may be subject to Internal Revenue Service (IRS) imposed tax liabilities, penalties, and interest charges.
Q: Do owner-operators receive a tax return?
A: Most commonly, no. In most cases, if an owner-operator receives an income tax refund, it means they paid more than they need to in taxes throughout the year.
Typical Owner-Operator Tax Deductible Expenses
Many business owners overlook costs that can be used as a tax deduction. Keep in mind, anything that is required for you to complete your job, work-related expenses, or your 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 However, 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.
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 of 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.
Always keep separate banking accounts, credit cards, and checks for all your business expenses. Do not mix business accounts with a personal account, so that you can save time sorting business expenses at tax time.
Communication devices. The expenses of purchasing and using a cell phone, pager, or any other communication device are tax-deductible for owner-operators. You must keep detailed records of all business calls including the number and name of the business contacts and the reason for the business call.
Satellite radio is often a tax deduction for owner-operators. This is because you can use it for traffic updates and weather reports. Both methods are essential to the operation of a truck.
Individual retirement plans qualify as a tax deduction. If you lease your tractor-trailer or other company vehicles, the full expense is tax-deductible.
Tax deductions for tractor or trailer damages. This includes theft, damage from a wreck, fire, or weather.
Equipment depreciation. 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 inside.
Medical expenses. Insurance is also an owner-operator contractor tax deduction. This includes coverage for medical, dental, vision, life, employee, and vehicle and property insurance.
A portion of your health and medical expenses is deductible. However, your medical bills can only be deducted if, the total of the 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.
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 mileage driven. In addition to mileage, you can deduct toll expenses, travel expenses, parking fees, and meals while you are the road.
This is not a full list of tax deductions, but 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.