The trucker per diem tax deduction is one of the largest tax deductions for truck drivers. Being able to understand and use this tax deduction properly can help reduce your income tax liability. Keep reading below to learn how the truck driver per diem affects your taxes and the requirements you must meet to claim it. What does per diem mean?
What does per diem mean?
“Per diem” is a Latin phrase that means “for each day.” In the trucking world, you may hear this term used in one of two ways. One, being used as a daily meal allowance term. This is where a trucking company reimburses you for the added meal expense. Since this is an employer reimbursement, this portion of your salary is untaxed.
Secondly, per diem can also be referred to as the amount the Internal Revenue Service (IRS) allows you to deduct from your taxable income. The tax agency allows a certain amount per day of over-the-road travel. This is if you meet certain requirements.
Figuring per diem rates
The difference between per diem pay and per diem tax deduction is important to know and understand because it affects the way you figure taxes. As of January 2021, the per diem allowance is $66 per day in the continental United States. However, if you deliver goods outside the continental U.S., this rate increases to $71per day. The IRS currently allows owner-operators to deduct 80% of the per diem rate.
Per diem rates for riders
If a spouse or partner rides with you to help assist with your duties, they can also claim a per diem tax deduction. Riders without a CDL who help with bookkeeping, dispatching, and loading or unloading can claim a per diem rate of $33 per day. The IRS allows them to deduct half of that amount from their taxable income.
Meeting qualifications for per diem tax deductions
Per diem tax deductions are unique because these deductions do not require you to keep receipts for travel expenses. Because of this, the IRS places restrictions on per diem eligibility. Per IRS Publication 463, you must meet both of the following requirements to claim the per diem deduction.
- You are away from your tax home for “substantially longer” than an ordinary day’s work.
- Your work requires you to sleep or rest while you are away from home.
A nap does not necessarily consist of having to spend a full day away from home. Your off-duty rest period must be long enough for you to rest. In most cases, if you are fulfilling Hours of Service (HOS) requirements away from home, you can claim the per diem tax deduction.
Rules for partial days
If you are leaving or returning home, this only counts as a partial day. The per diem rate for a partial day is ¾ of a full day. If your normal rate is $71 per day, your per diem rate for a partial day would be $53.25.
Avoiding potential problems
So, what if you are a company driver and your employer pays you a per diem rate? The IRS states you are unable to claim a tax deduction on untaxed income. This is referred to as non-taxable per diem. However, you may still be able to claim a partial per diem tax deduction.
If your employer pays you a standard meal allowance of $45 per day, you then subtract that amount from the maximum allowable per diem rate of $71. You can also take 80% of the remaining $26 as a deduction. However, if the trucking company pays you the federal per diem rate or higher, you cannot take a deduction.
Calculating your per diem tax deduction
Tax preparers and most tax preparation software perform these calculations for you. However, some individuals prefer to do their own calculations. Use the following formulas to determine your tax deduction amount.
- (number of full days) x (per diem rate). If you have days outside the continental U.S., calculate them separately with the higher rate, and then add the two amounts together.
- (number of partial days) x (per diem rate) x (0.75). For days outside the U.S., use the same calculation with the higher rate, and then add the two partial day figures.
- Add the answers from step one and step two. Take this figure times 80%. This is the actual amount of your per diem tax deduction.
If you have a qualifying rider, the steps are mostly the same. Do the calculations for step one and step two. In step three, take the final figure times 50% instead of 80%.
Defining a tax home
The IRS has a specific definition of what a tax home is. The following are three requirements for your tax home; your home must meet two of these requirements.
- You do at least part of your work in the same area as your main home and live there while working in that area.
- You are duplicating expenses at and away from home because your business requires you to be outside the area. For example, you pay for an electric hook-up at a truck stop and pay an electric bill at home.
- You live in your main home when you are in the area or have family members living there, and you help maintain it.
Tracking per diem for truck drivers
Maintaining good records can help support your per diem claims. Fortunately, record keeping does not have to be complicated. Use a pocket calendar to track full and half days. For example, you could use an “X” to mark full days and a “/” to mark half days. If you make deliveries outside the continental U.S., place a star on those days to help remember which days are higher per diem rate.
Maintain these records for at least 5 – 7 years after you file your taxes. This way, you have sufficient documentation in case questions arise later or you are audited.
For many truck drivers, the per diem tax deduction can substantially reduce their tax bill. Make sure you meet the requirements for each day. If you are unsure whether a day qualifies, consult a tax professional. Also, you can have an accountant review your taxes periodically to help you find other tax deductions and credits that are available to you.