Understanding how independent contractor truck driver taxes operate is one of the most difficult aspects of running a trucking company. By employing careful planning and bookkeeping throughout the year, you can avoid any major hitches.
You are responsible for paying independent contractor taxes as an owner-operator. This is a significant adjustment for everyone who has previously worked for the corporation. Previously, your taxes were deducted automatically from your paycheck; now, you must calculate and pay your truckers income tax to State and Federal agencies on your own.
At the end of each quarter, you must pay estimated tax payments, which are typically in the range of 20-30 percent of your net income for the quarter. In addition to avoiding a tax penalty, complying with this requirement removes any unexpected tax bills as Tax Day arrives.
How to File Taxes for Truck Drivers?
As an owner/operator, you should obtain a 1099-NEC at the end of the year from each client who paid you more than $600 during the course of the calendar year. You’ll use those 1099s, as well as your own documents of income and expenses, to declare your trucking earnings and expenses on Schedule C of your tax return. It is possible that you will be required to file Schedule SE in order to report self-employment taxes. In addition to your Form 1040 tax return, you’ll need to file both of these forms.
What are the Most Common Truck Driver Expenses That You Can Deduct From Taxes
Here are the most common truck driver tax deductions that can be claimed:
Dues to the association
Many truck drivers are members of a trucking union or organization. You can deduct any costs you have to pay to join a union or a group as long as they are important for the business or to advance your trucking career.
Computer/Cellphone
If you use your smartphone, iPad, or laptop solely for work, you can deduct the whole cost of the equipment as well as your monthly data or internet plan. You can only claim the business portion of your expenses if you use the equipment for both business and personal reasons.
Clothing
Even if you simply use it for work, clothing worn for daily use isn’t chargeable. However, you can deduct specialist clothing and safety equipment that you need for your job, such as protective eyewear or back braces.
Education
Many drivers pay for CDL training or other additional certifications in order to get or keep their licenses. You can deduct the expense of this education if you use it to enhance your skills in your existing line of work or if it is essential for your job.
Equipment and Tools
You can deduct any equipment and machinery you need for your trucking business, including:
· Bungee cords
· Chains
· Tarps
· Bungee cords
· Duct tape
· Tire irons
Insurance
You can obtain insurance to cover cargo or lost income due to a business disruption in addition to the commercial auto liability and property damage insurance you’re obliged to have on your truck. These premiums are deductible as a company expense.
You may also have to pay for your own health insurance coverage. This is deductible but not as a business expense. Instead, you deduct the cost of health, dental, and vision insurance for you, your spouse, and your dependents on Schedule 1 Form 1040.
Meals
If you drive locally or significant distances, you may be able to deduct meals. The first step is to figure out where your “tax home” is. This is generally your home location or the headquarters of your company. Meals can only be deducted if you are away from your tax home for at least one night or long enough to require a pause for sleep or rest. Local drivers cannot deduct meal and beverage expenses, although long-distance truckers can.
Meals can be deducted using either the actual expense method or the per diem allowance. When using the actual expense technique, you must keep account of all of your dining expenses, including tips and taxes.
Travel Costs
Other travel expenses incurred while away from your tax home overnight (or for a period of time long enough to necessitate repose) are deductible. This can include things like:
· Hotels or other accommodations
· Tolls
· Parking
Truck drivers must claim actual lodging expenses, even though the IRS has a per diem rate for other industries. They are unable to collect the per diem rate in the same way that they are able to claim meal expenses.
Medical Examinations
Many drivers are required to get regular medical checkups as a mandatory requirement. These mandatory exams’ out-of-pocket charges are deductible business expenses. Other common medical expenses, including doctor or hospital visits and drugs, are only deductible if you itemize on Schedule A.
Office Expenses
Traditional office expenses for your trucking business are deductible. This may include:
· Postage
· Paper and pens
· Calculators
· Faxing and photocopying
· Cost of accounting software, such as QuickBooks
Personal Products
Small purchases are a must especially if you spend a lot of hours out on the road. This might include:
· Cooler or minifridge to store food and water
· Logbook
· Flashlight
· GPS
· Bedding
· Alarm clock
· Sunglasses
· Gloves
· Cleaning supplies
While on business, you can also deduct the cost of showering or doing laundry. Keep a record of these costs because they can add up quickly.
Subscriptions
If you subscribe to trucking-related publications, you can deduct the full cost of your subscription.
Taxes and Licenses
Taxes and licenses paid for your business, such as the Heavy Highway Vehicle Use Tax and the cost of keeping a CDL license, are deductible.
Vehicle Expenses
A semitruck is an eligible non-personal-use vehicle, according to the IRS. This implies you can deduct all of your actual car running expenses, such as:
· Depreciation
· Fuel
· Insurance
· Loan interest, if you financed the purchase of your truck and trailer
· Registration
· Repairs and maintenance
· Tires
· Washing
Semitruck drivers are unable to claim vehicle expenditures using the usual mileage method, which is available to other business-use cars.
How to Minimize Your Taxes
The following are tried-and-true tax-saving strategies:
· Seek advice from a tax professional or a company that specializes in owner-operated enterprises. Because there are so many different tax specialists out there, concentrating on one that specializes in working with carriers and owner-operators will ensure you get the best guidance for your trucking company.
· Regularly contributing to an IRA, SEP, or 401(k) allows you to save money tax-free. Until you start drawing it out several years later, the money you give up to a specific level is tax-free.
· Keep track of your personal vehicle mileage. While you can’t deduct mileage for driving to and from work in your own vehicle, you can deduct it for business-related trips to the bank, a conference, a truck show, a goods store, or a service center.