Taxes are a part of life, and understanding truck driver taxes is a must for every driver. Luckily, if you’re employed by a trucking company and work as an employee, your taxes are a lot simpler than the taxes of owner-operators who have to file their own taxes as independent contractors.
However, owner-operators benefit from a number of tax deductions at the same time. Keep reading to learn about how tax preparation for truck drivers works and how you can minimize your tax burden as an owner-operator.
How Does Tax Preparation Work?
Every truck driver needs to file their taxes. That said, the process is a little different depending on whether you work as a company driver or an owner-operator. Keep reading to learn more about the differences between company driver and owner-operator taxes so that you can file correctly and stay compliant.
How Does a Truck Driver File Taxes?
Truck drivers can file taxes in two main ways, including either as employees or as independent contractors. Company drivers are classified as employees and they receive a W-2 at the end of every year.
These drivers work as either hourly or salaried employees who receive consistent paychecks, company benefits and schedules. Throughout the year, taxes are withheld from the paychecks of company drivers for the sake of federal income tax, state income tax, Social Security and Medicare.
As W-2 workers, company drivers have straightforward tax preparation processes. Filing an income tax return as a company driver will either indicate that the driver has paid too much in taxes and needs a refund or they may end up owing the IRS if too little tax was withheld.
Conversely, owner-operators are considered independent contractors. Owner-operators are not considered employees because they own their businesses and contract their services, often to multiple customers throughout the year.
As people with their own businesses, owner-operators do not have their taxes withheld by anyone but themselves. As 1099 workers, owner-operators must report their income to the IRS as well as pay both income taxes and self-employment taxes to cover their share of Social Security and Medicare.
Every customer that has paid an owner-operator more than $600 in the past year must issue a 1099-NEC form to the owner-operators they have hired. The contractor then uses their 1099s to file their taxes. While this process is more complex than the tax filing process for company drivers, owner-operators benefit from greater deductions.
Do Truck Drivers Get Paid W2 or 1099?
Company truck drivers receive Form W-2 from their employers, while owner-operators receive Form 1099 from their customers.
Can Truck Drivers Claim Fuel on Taxes?
Owner-operator truck drivers can claim fuel costs on their taxes, but company drivers cannot because their employers cover these expenses for them. Since the IRS classifies semi trucks as qualified non-personal-use vehicles, the costs of operating said vehicles are tax-deductible.
Can I Write Off Semi-Truck Payments?
Owner-operators can claim back loan interest for truck and trailer financing as well as leasing payments. Since semi trucks are qualified non-personal-use vehicles, you can claim all actual operational expenses on your owner-operator taxes, including insurance, depreciation, registration and maintenance costs.
Tips for Preparing Truck Driver Taxes
If you’re an owner-operator, pre-planning before filing your taxes is a must. As a 1099 independent contractor, you will need to make quarterly tax payments, keep records of your expenses, understand your tax deductions and work with a licensed tax professional to ensure that you are properly paying your taxes.
Make Quarterly Payments
To avoid penalties, owner-operators must make quarterly payments towards their estimated tax obligation. By using Form 1040-ES, you can figure out your estimated quarterly tax payment.
It’s recommended that owner-operators set aside 25% to 30% of their net income to pay their quarterly taxes. Failure to pay these quarterly taxes can result in an underpayment fee or interest on unpaid taxes.
Keep Records of All Expenses
Keeping records of expenses is essential for all owner-operators. While filing taxes as an independent contractor is more complicated than filing as a company driver, the main benefit is that you can write off your business expenses.
However, the only way to claim business expenses is with proof of receipts. As such, make sure you keep a record of any receipts that you receive while on the road, and consider digitizing them for convenience as well as organizational reasons. You will need this proof in the event that you are ever audited.
Know Your Tax Deductions
Understanding your tax deductions is essential because it’s a way to ensure that you aren’t overpaying in terms of your taxes. Per diem deductions are how owner-operators are able to write off both their ordinary and necessary purchases while on the road.
This per diem deduction covers lodging meals and incidentals while you’re away. The per diem rate is currently capped at $150 daily, which is made up of $95 for lodging and $55 for meals or incidentals.
Truck drivers also have standard deductions related to their regular business expenses. These tax write-offs include fuel, truck maintenance, office supplies and cell phones.
Work With a Tax Professional
While it may seem like an added expense, hiring a trusted tax professional versed in independent contractor taxes can save you time, ensure compliance and prevent you from having to spend more money than you need to.
Taxes can be very stressful unless you’re comfortable and confident about doing your taxes by yourself. This is especially true considering that owner-operators must make quarterly tax payments.
Mistakes can also trigger an audit by the IRS, so you must complete your return without making any errors. A tax professional is more likely to identify all of the tax write-offs for which you are eligible, ultimately helping you reduce your tax burden.
Common Tax Deductions for Owner-Operators
There are many tax deductions that owner-operators can benefit from in most cases. As 1099 independent contractors, most business expenses are considered tax write-offs.
Here are some examples of common tax deductions for owner-operators:
- Fuel
- Per diem daily expenses up to $150 per day
- Travel costs
- Tolls
- Parking
- Hotel stays
- Truck maintenance and repair
- Tools and equipment
- Tires
- Tarps
- Chains
- Bungee cords
- Tire irons
- Business-related insurance
- Commercial auto liability
- Property damage insurance
- Trucking association fees and subscriptions
- Office supplies and expenses
- Truck depreciation
- Cell phones, computers and internet for business purposes
- Specialized clothing required for work
- Continuing education expenses related to your line of work
- Medical exams required as a condition of work
- Taxes and license fees related to your business
- Sleeper berth expenses
- Cleaning supplies
- Bedding
- Flashlights
Trucker Tax Solutions for Every Driver
Whether you’re an owner-operator who needs to file independent contractor taxes or you are a W-2 company driver, there is a trucker tax service that can help you. Take charge of your taxes and contact a trusted tax accountant to ensure you’re a responsible, tax-compliant truck driver.
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