Taxes for Owner Operators
In 2018, a new tax reform came into effect. It affected many people in different ways. Owner operators, however, likely benefited – and will continue to benefit – from this reform.
For certain business structures, called pass-through entities, a big change was made. The tax reform allowed for a 20% deduction of earnings. These entities include:
- Sole Proprietorships
- Limited Liability Companies (LLCs)
- S Corporations
In order to maximize tax breaks, it is recommended to consult with a CPA to ensure the business is structured correctly.
In addition to the 20% deduction, there are many items an owner operator can claim as tax breaks. There were some concerns surrounding the tax reform about owner operators being able to continue to claim daily per diem. Although company drivers are no longer able to claim daily per diem, owner operators are. Other business expense related tax breaks include:
- ATM, Bank, and Credit Card Fees – ATM surcharges, bank and credit card fees can be deducted.
- Business Related Loans or Mortgages – The interest from any commercial loans or mortgages are deductible.
- Casualty Financial Loss – Costs to repair damaged equipment resulting from an accident or weather-related event can be claimed.
- Depreciating Property – Trucks, trailers, office equipment can be claimed.
- Fuel Costs – Any fuel costs that are not reimbursed by any companies are deductible as business expenses.
- Government Fees, Licenses and Permits – Business expenses to keep the operation legal can all be claimed. However, violations or government fines cannot be.
- Home Office – An owner operator managing their trucking business out of their home may result in being able to deduct home office expenses.
- Maintenance Costs – Any cleaning or repairs may be deductible, unless the owner operator performs their own maintenance, then only the cost of parts may be deducted.
- Phone and Internet Access Fees – 50% deductions for phone and internet expenses are allowed by the IRS.
- Retirement and Insurance Plans – Contributions made to a retirement plan for an owner operator and their spouse are deductible. Insurance premiums paid for company or personal plans are allowed to be claimed as well.
- Travel Expenses – The IRS allows lodging, parking, and toll costs to be claimed as deductions.
- Truck Leases – Any payments made in a lease purchase agreement are deductible, except the down payment.
This tax reform has enabled owner operators to save money in taxes and put more money in their pockets. With company drivers no longer allowed to claim a lot of deductions they previously were, this is one major advantage to becoming an owner operator.
Keeping track of expenses and keeping receipts throughout the year will ensure accurate and maximized tax breaks during tax filing season. There are plenty of online resources to assist in preparing and filing taxes, but when in doubt, consult a local CPA.