2016 Tax Tips For Truck Drivers
Taxes and the trucking industry
Truck drivers incur unusual and often significant amounts of business expenses, so the IRS offers multiple tax deductions for these drivers’ use. Most of these deductions are available to drivers working for a company and self-employed drivers (Owner Operators), but some of them only apply to self-employed drivers. Additionally, any employer-reimbursed expenses are NOT deductible.
So what kind of tax deductions can truck drivers use?
First, we need to recognize certain requirements.
For a truck driver to claim a deduction, they must have what the IRS refers to as a “tax home”. This means that the driver must have a permanent location in which they receive mail and use to pay their taxes.
Truck Driver Tax Deductions
The majority of tax deductions available to truck drivers are business deductions. So for the owner-operator, these deductions are often applicable more than for other types of employees.
- Telephone or Internet Access Fees: The IRS recognizes that mobile phones and wireless internet laptops are necessary for most truck drivers. However, it also believes that these tools will also be used for personal purposes while drivers are on the road. Therefore, it only allows drivers to deduct up to 50 percent of the cost of access fees. The entire cost of the actual phone or laptop required for work is deductible.
- Subscriptions to Trucking-Related Publications: Because these publications often discuss new regulations and information relevant to the field, the IRS allows drivers to deduct their full cost. In general, a driver should be able to demonstrate that the main or only reason they subscribe to the publication is because of its pertinence to their business or employment.
- Association Dues: Most truck drivers are required to be affiliated with unions or other collective trucking groups. The dues required for membership are entirely deductible. Voluntary memberships may also be deductible, but only if the employee can demonstrate that they assist in their career or are a regular membership in the industry.
- Medical Examinations: Drivers required to undergo medical examinations for employment can deduct any out-of-pocket costs they incur. These deductions are taken as a business expense and not a medical expense, and, as such, do not need to meet the minimum threshold required to deduct a medical expense.
- Licensing Fees: The costs associated with obtaining and maintaining a commercial driver’s license (CDL) is entirely deductible. Similarly, the costs of any continuing education required to maintain a license with an employer, state or federal agency are deductible.
- Travel Expenses: This category of deduction is broad. Expenses a driver incurs while on the road and working are deductible. This includes transportation to and from meals or lodging as well as any tips paid. It also includes the costs of postage for any mailings required to be sent from the driver’s on-road location to their employer. Toll booth payments and truck parking costs are included in this category.
- Per-Diem Meal Costs: The IRS allows drivers to deduct the specific amount of the costs of their meals while on the road and working or a uniform, per-diem cost. As of 2011, the per-diem cost was $46.00 per day. Therefore, every day a driver was on the road and was required to eat away from home entitles the driver to a $46.00 deduction.
- Truck Maintenance Costs: Expenses associated with truck maintenance and cleaning are deductible regardless of whether the driver leases or owns the truck or works for an employer. This deduction includes: batteries, tires, sponges, cleaning supplies, CB repairs, truck parts and repairs.
- Fuel: Drivers can deduct the cost of fuel they pay for out-of-pocket and which is not reimbursed as long as that cost exceeds $100.00.
- Personal Necessities: Personal items a driver requires to work on the road are deductible. These include: flashlights, binders, calculators, overalls or other specialized clothing, luggage, log book papers, coolers for food, gloves and sunglasses.
Deductions for Owner-Operators
Truck owner and operators have additional deductions available to them. These truck drivers can deduct the cost of insurance premium payments, leasing fees for the truck and interest payments made on the loan used for the truck’s purchase.
Owner-operators can also deduct the depreciation amount the truck sustained over the year. This deduction is available each year that the truck is owned, used and in which it depreciates in value.
Claiming Your Truck Driving Deductions
As a truck driver, you have several deductions available for your taxes that were specifically designed for your employment. Seek legal or financial advice if you are unsure what deductions apply to your situation.
If you are a self-employed driver (owner-operator), whether you account for self-employment income yourself or you receive form 1099-MISC, miscellaneous income from another company, you should report your income on Schedule C. If you are self-employed and your net earnings are $400 or more, you must pay self-employment tax on the income you report on Schedule C. In addition, you may need to make estimated payments to cover the amount of self-employment tax or income tax associated with the income you report on Schedule C.
You may be able to reduce your taxes by deducting unreimbursed, work-related expenses. If you are an employee, these expenses may be claimed as miscellaneous Itemized Deductions on Schedule A, Itemized Deductions. If they are attributable to being a statutory employee or self-employed, they may be deductible on Schedule C. You should keep receipts to substantiate these expenses.
Examples of some items you may be able to deduct include:
- Vehicle expenses (for example, parking fees and tolls; standard mileage rate if not deducting actual expenses; and actual expenses such as maintenance and repairs, fuel, oil, registration fees, insurance, tires, and depreciation if you own the vehicle)
- Travel Expenses, including lodging, meals (with limitations), and laundry expenses if incurred while traveling away from home
- Union and trade association dues
- State or local government licenses and regulatory fees
- Flat-rate occupational taxes and excise taxes (for example, heavy highway vehicle use tax)
- Liability insurance premiums
- Subscriptions to trade publications
- The cost and upkeep (for example, cleaning) of uniforms if they are required for work and not suitable for everyday wear (for example, the cost of safety shoes and gloves for a truck driver carrying blacktop) Note: If you wear a company uniform but are not required to wear it, you cannot deduct uniform expenses
- Leasing costs (for example, a truck driver’s trailer rental fees or a taxicab driver’s rental fees paid to a cab company for the use of its vehicles)
Other expenses related to truck drivers include cargo losses and damage claims if cargo costs were included in income and pay to other drivers who assist you with your job. If these drivers are your employees (instead of independent contractors), you may be responsible for paying employment taxes, such as Social Security tax, Medicare tax, and federal unemployment tax.
When determining vehicle expenses, you cannot use the standard mileage rate for vehicles used for hire such as a taxicab or a bus.
To deduct travel expenses, you must be traveling away from home, which means your duties require you to be away from the general area of your tax home longer than an ordinary workday, and you need to sleep or rest to meet the demands of your work while you are away from home. You cannot satisfy this rest requirement by merely napping in your vehicle or grabbing a quick bite to eat. Also, you do not have to be away for a whole day, or from dusk to dawn, as long as your break from work is long enough for you to get the necessary sleep or rest. Most local drivers do not have travel expenses. However, as a long-distance truck driver, you may deduct travel expenses if you can substantiate expenses. You need to keep receipts or maintain a log with such information as the amount, time, place, and business purpose of the travel expenses incurred. Maintaining a log book with cities, distance, and driving time or keeping track of the number of hours driven and the number and duration of the stops may not be enough to support a deduction for travel expenses.
You must determine the location of your tax home before you can determine whether you are traveling away from it.
- Generally, your tax home is your regular place of business. It does not matter where you live.
- Your tax home includes the entire city or general area in which your business or work is located.
- If you have more than one regular place of business, your tax home is your main place of business.
- If you do not have a regular or a main place of business because of the nature of your work, your tax home may be the place where you regularly live.
- If you do not have a regular place of business or post of duty and there is no place where you regularly live, you are considered a transient and your tax home is wherever you work.
For example, the tax home of a driver usually is where they begin and end a trip, even if they live somewhere else. A self-employed truck driver’s tax home may be at the headquarters where the trucking assignments are given out, even if that is far from where they live.
You may use the standard meal allowance instead of actual meal expenses when calculating your deduction for meal expenses while traveling away from your tax home. The standard meal allowance rate for most small localities in the United States is $46 per day. Most major cities and many other localities in the United States qualify for higher standard meal allowances.
You can use a special standard meal allowance of $59 per day if you work in the transportation industry, which includes those whose work directly involves moving people or goods by bus or truck, regularly requires them to travel away from home, and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest.
If you choose to use the special rate for any trip, you must use the special rate for all trips you take that year instead of using the regular standard meal allowance rates. The latest meal rates are published online by the IRS in Publication 1542, Per Diem Rates. This publication is only available online and is updated throughout the year as new per diem rates are announced by the General Services Administration.
Generally, you can deduct only 50% of your business-related meal expenses. However, you can deduct 80% of your meal expenses while traveling away from your tax home if the meals take place during or in conjunction with any period subject to the Department of Transportation’s “hours of service” limits. For example, interstate truck operators and bus drivers who are under Department of Transportation regulations are subject to these limits. If you purchase fuel for buses used in certain ways, you may qualify to claim a fuel tax credit. For example, if you are a bus driver and purchase gasoline for a bus available for chartering by the general public, you may qualify for this credit.