If you’re an owner-operator in the trucking field, it’s crucial to understand how taxes work. There are many tax deductions you can benefit from as a truck driver, but you also need to pay additional taxes and stick to certain reporting requirements. This overview will walk you through the basics.
As an owner-operator, you need to know what you can and can’t write off. If you don’t know all the rules, you could be missing out on common tax savings for truck drivers. And if you’re hiring an accountant, you may not save the necessary receipts and will need to estimate the expenses.
You also don’t want to write off expenses you shouldn’t be. This can lead to an IRS audit. The primary standard for a write-off is that it needs to be necessary for conducting business, as well as ordinary for the industry. For example, lodging expenses are necessary and ordinary.
Food expenses can be complex. If a truck driver falls under Department of Transportation (DOT) regulations—which most owner-operators do—they can write off 80% of away-from-home expenses. However, the maximum you can write off is 80% of $59 per day on food. Also, keep in mind that you’ll need to provide adequate proof, including lodging receipts, meal receipts, and fuel receipts, that you were traveling and couldn’t eat at home.
Some other common deductions to include when doing your taxes are insurance premiums, retirement plans, truck leases, communication equipment, accounting services, permits and license fees, and start-up costs.
Owner-operators are responsible for calculating and paying taxes themselves. This is very different from working at a company, where the taxes are automatically deducted from your paycheck.
Estimated tax payments need to be made at the end of each quarter, and you may need to pay anywhere between 20% to 30% of your net income. Following this schedule will reduce penalties and ensure that you don’t have a large, surprise tax bill on April 15th.
A few types of taxes need to be paid. State and federal income taxes should be calculated on your tax return, and you’ll be responsible for this process. Similar to the Medicare and Social Security taxes you may have paid as an employee, you’ll need to cover self-employment taxes. The tax rate is 15.3%, with 2.9% going to Medicare and 12.4% to Social Security.
Whether you become an owner-operator or employee, Hamrick School will help you prepare for a career in the trucking industry, including learning about taxes. Reach out at (330) 239-2229 to discuss our CDL programs.
- OH Reg. #2057
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