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per diem for truck drivers

The new per diem regulations were passed in December of 2017 and took effect for the next year’s tax season. Even though that was 4 years ago, there’s still a lot of confusion about changes in per diem for truck drivers. There’s a lot of information and mis-information out there, so we’re here to make it a little simpler.

The per diem rules are all about costs on the road and how you get paid back. You work hard to make a living, and every dollar counts. Make sure you understand per diem for truck drivers to keep money in your pocket. Whether you’ve never been clear on how per diem works or you want a refresh, this is for you

1. Definition

In a nutshell, per diem is money given for any place you stay overnight, meals, and other incidental expenses.

Literally, per diem means “per day,” and you can think of it as a set amount that you will be reimbursed for certain expenses per day. The updated per diem regulations come from the 2017 Tax Cuts and Jobs Act. 

2. How does Per Diem Actually Work?

Per diem is a form of reimbursement. If your company has a per diem allowance, you probably have to pay for meals on the road, and then they will reimburse you for that cost in your next paycheck. The money usually comes as a set amount or in proportion to the number of miles driven. Since you paid for those meals (or lodging, etc.) out of pocket, and your company is simply paying you back, that money is not considered taxable income. Good news for you! That distinction between per diem (which is a reimbursement) and income is important. It means that your adjusted gross income will be lower when it’s time to file taxes. And a lower adjusted gross income means that you will likely owe less in taxes or get a bigger refund. 

3. Impact for Company Drivers vs. Owner Operators

Company Drivers

income taxes

Under the Tax Cuts and Jobs Act, per diem for truck drivers has changed the most for company drivers. If you’re a company driver, you can no longer itemize deductions for your taxes. In other words, drivers cannot show all of the expenses that come from being on the road in the same way that you used to. Don’t worry though. You can often still receive per diem for the nights you’re away from home.

There are two ways the money you spend for your job comes back to you. First, most company drivers will make up a lot of that money by claiming the standard deduction, which doubled under the Tax Cuts and Jobs Act. For single tax filers, the standard deduction went from $6,300 to $12,000 and for couples filing jointly, it increased from $12,000 to $24,000. Second, some companies have increased their per diem wage. 

Here’s an example. If you get paid 55 cpm, and 45 cpm is a base wage and 10 cpm is considered per diem wage, that part of your income is not taxable. Now, if a company still pays 55 cpm, but 35 cpm is a base wage and 20 cpm is per diem wage, that would mean that 36% of your income would not be taxable.

A higher per diem wage means that your salary stays the same, but you will pay less in taxes. Companies should, however, be very careful to avoid wage recharacterization.

Owner Operators

Tax season for owner operators hasn’t changed as much in terms of per diem. Owner Operators can continue to claim per diem expenses more or less as usual. What is the impact of the Tax Cuts and Jobs Act on owner operators? Actually, it’s a huge benefit. As an owner operator, you can continue claiming per diem and use the higher standard deduction rate. To do that, keep careful track of your work expenses. If you claim per diem for truck drivers in your taxes, you will need to individually list out, or itemize, all your costs. A little organization early on goes a long way when tax season rolls around.

4. So… Do Company Drivers get Per Diem Benefits?

trucking industry changesIn short, it depends on your company. If your company reimburses costs with a flat rate or a cpm increase in your salary, then yes—you are getting per diem benefits. If your company does not offer a flat rate or cpm increase for overnight stays, you can no longer claim those expenses as lost income on your taxes. You can claim the new standard deduction which is much higher and will help offset the money spent for food and lodging while on the road.

5. Eligibility 

Per diem programs can vary significantly by company. When you consider joining a new company, ask about their per diem policy. Our friend Leah Shaver, President & CEO of The National Transportation Institute (NTI), works closely with industry experts to track driver compensation, including per diem.

Leah shared, “[NTI’s] in-house research analysts and fleet executives collaborate to design, develop and deliver driver pay studies. One of those pay study subject matters is per diem and we find that many fleets offer this benefit in some form, either per day or per mile, some even on a percentage basis.”

Not all companies have a per diem plan, but these programs can be a benefit for both company drivers and owner operators. If there is a per diem program, find out whether you are eligible. This eligibility may be based on the number of miles you’ve driven, how long you’ve been with the company, or other similar criteria. Then, if you’re eligible, decide if joining the per diem program makes sense for you. 

6. When you get the money (Owner Operators)

Choosing to claim per diem for truck drivers as an owner operator can change when you will get the money for the costs of being on the road. 

Essentially: Do you pay for expenses and then get reimbursed in your next paycheck? Or Do you claim per diem in taxes (owner operators only) and get a bigger tax refund? If you participate in a company’s per diem program, you will be reimbursed throughout the year in your paychecks. If there is no per diem program or you choose to claim those expenses on your taxes, you will get a bigger tax return. At the end of the day, your take home pay (after all taxes) should be very similar.

Think of per diem as a decision of when to get the money and in what form, not of how much money you will get.

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truck driver tax deductions

Tax season is right around the corner. It may not be your favorite time of the year, but we want to help make it as painless as possible. Truck driver tax deductions are a great way to save money on taxes. There are three golden rules of filing taxes. 

          Step 1. Find your Form      

          Step 2. Save Money with Truck Driver Tax Deductions

          Step 3. File before April 15

 

The money you spend for work on the road might increase the money you get back from taxes. So, keep a careful record of any costs you have that are job related. Staying organized might bring you a big payoff in your taxes. Remember, if you have any questions or doubts, ask a professional. The Trucker’s Report made this list of trusted sources who know trucking. Many tax companies offer a first free conversation that can clear up your concerns. You can also use services like Turbotax or H&R Block to make filing easier. Let’s get started.

Step 1: Find your Form

If you are a company driver, you will likely receive a W-2 form by the end of January. A W-2 form reports a trucker’s income and annual wages. Most company drivers will then use the information from the W-2 to fill out a 1040 or 1040A for taxes. There is also a simplified version of this form called the 1040EZ, but you must meet several requirements:

  1. Make less than $100,000 annually
  2. Have a tax status of single or married filing jointly
  3. Choose not to itemize deductions

There are several trucking deductions that are likely to save you money, so consider carefully before choosing the 1040EZ.

If you are an owner operator, the easiest way to report your income is with a 1099 form. The 1099 form is used to report miscellaneous earned income. If you made the leap to become an owner operator, it’s important to stay very organized. This form allows you to carefully itemize the costs of your work and deduct them from your taxes. That’s money back in your wallet!

Step 2: Save Money with Truck Driver Tax Deductions

This is the good stuff. Claiming work-related tax deductions is important. It reduces your adjusted gross income, and that means you pay less in taxes. 

Here’s how it works: John makes $75,000 annually as a company driver (his “gross income”). He is able to claim deductions for licensing fees and other work expenses that total $6,500. Since John already paid $6,500 for these expenses and wasn’t reimbursed, he can subtract $6,500 from his total income. Now, John only pays taxes on $68,500 (his “adjusted gross income” or AGI). A lower adjusted gross income means you pay less in taxes. You report your gross income and then calculate your adjusted gross income on your tax forms, but only the adjusted gross income is taxed. 

Now, let’s find those truck driver tax deductions!

Who can claim these deductions?

Some tax breaks apply to only owner operators. Others are specific to company drivers. In general, local drivers can’t claim these deductions. To claim these deductions you must have a “tax home”—a place the IRS can contact you. Usually this is your home address. A good rule of thumb is that you can’t claim anything your company reimburses you for (you’ve already gotten that money back).

Here is a quick look at the deductions you might qualify for. Click each category for more details if you’re not sure whether you can claim that deduction on your taxes.

 

Deduction Category

Owner Operators

Company Drivers

Cell Phone Plans & Internet Fees
Medical Exams
Licensing Fees
Food on the Road
Truck Repairs/Maintenance
Association Dues
Personal Products
Fuel & Travel Costs 

(different for owner operators & company drivers)

Non-trucking Standard Deductions

Key Non-Deductible Expenses

We’re all for saving money, but there are a few common costs that are NOT deductible. Drivers are NOT allowed to deduct the following things from their annual income.

  1. Expenses reimbursed by your employer
  2. Clothing that can be adapted for everyday wear
  3. Commuting costs to the company headquarters. However many companies WILL reimburse for commuting costs to the truck yard. If you’re not sure, ask your company.
  4. Home phone line
  5. Owner Operators CANNOT deduct the time spent working on their equipment
  6. Owner Operators CANNOT deduct the income lost as a result of deadhead/unpaid mileage. But, Owner Operators CAN deduct the expenses incurred to operate the truck during that time such as fuel, tolls and scales. etc.
  7. Owner Operators CANNOT deduct for downtime

The 9 Deductions You Should Consider (the nitty gritty details) 

1. Cell Phone Plans & Internet fees

cell phone

No driver spends a significant amount of time on the road without using their phone and internet a lot. Luckily, the IRS agrees. Since most drivers use their phone for both personal and professional purposes, you are allowed to deduct 50% of your phone and internet costs. You can also deduct the entire cost of a new phone or laptop that you bought this year. Communication and technology costs add up and now you can show it in your taxes!

2. Medical Exams

Did your employer require a health exam? Deduct the out of pocket cost! Did you see a doctor for a work-related issue? Deduct the out of pocket cost! Normally medical expenses are not tax deductible, but in this case, they are actually considered business expenses. Your health is a top priority, and it’s nice to have that recognized during tax season.

3. Licensing Fees

Any costs that you pay to get and maintain a CDL license can be claimed! In addition, if your employer requests that you continue your education, all those costs are also deductible. Company jobs that offer to pay for your schooling have never looked so good!

4. Food on the Road 

Drivers who are spending long hours on the road away from home are allowed to deduct a “per diem” rate of $63 per day. The IRS understands that you’re spending a lot of time behind the wheel and food costs add up! For each day you are on the road, you are allowed to deduct $63 dollars from your annual income. If you plan to claim per diem rates, get to know the details. Local drivers are not allowed to deduct food costs because you are able to eat at home after your route is complete. 

5. Truck Repairs/Maintenance

Any expenses you paid to repair or maintain your truck that were not reimbursed can be claimed! Whether you are a company driver or an owner operator, cleaning and maintenance costs are deductible. This could include truck parts, cleaning supplies, etc., but NOT the cost labor if you repair the truck yourself. 

6. Association Dues

Most drivers are required to be part of a union or other collective trucking group. Any required fees to take part in these groups is deductible. If you are part of additional trucking groups that are not required by your employer, you may still be able to deduct the cost. You can claim this deduction if you can demonstrate that it helps your career or is a regular membership in the trucking industry.

7. Personal Products

Personal products are typically the small purchases (that really add up!) that are necessary on the road. It could include food storage (think a cooler), logbooks, a flashlight, specialized clothing, electronic equipment you need for the road (ex. A GPS), and much more. Keep careful track of all these little expenses because they add to a big total, and you can deduct them on taxes!

8. Fuel & Travel Costs

If you own your own truck, you can claim the exact number of miles you drove on the job. You can also claim vehicle related costs including maintenance (see above), insurance premiums, and loan interest. 

For most drivers, if your fuel costs are more than $100 out of pocket and your company does not reimburse you, you can deduct the expense. You can also claim any costs from toll booths, parking, and lodging that are not reimbursed by your employer. Especially with changing fuel prices, this is often a huge money savings on your taxes!

9. Non-Trucking Standard Deductions

In addition to the trucking specific deductions you get to claim as a trucker, don’t forget about the common deductions that aren’t related to your work. These could include things like child tax credits, lifetime learning credits, and child or dependent care among other things. 

Back to the deductions chart.

Step 3. File before April 15 

It’s time. You’ve added costs and finished the paperwork. You’ll know by the time you submit your forms whether you need to send a check or will be getting a refund. You can file your taxes electronically or by mail as long as they are submitted by April 15. 

And with that, kick back and relax! Your taxes are done for another year!

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