Every tax season, thousands of truck drivers leave hundreds of thousands of dollars in tax deductions on the table. This is due in large part to inadequate planning and poor bookkeeping. In addition, many tax professionals do a poor job at properly informing truckers of the many different tax breaks available to them. Truck drivers have access to many different tax deductions and credits, and clearly this stresses the importance of consulting a tax professional.
It’s certainly a large investment to purchase or lease the vehicles you need for your business, but depreciation must be factored into your bottom line, as well. Depreciation is the decrease in value of the equipment or asset for the period it is in use. Internal Revenue Code says that you can only claim depreciation for three years on tractors and five years for trailers, potential tax liability will increase dramatically in the last qualifying year. This leaves many with huge tax liabilities that they didn’t plan for and can’t afford to pay.
Are you or your company using Cash or Accrual Accounting? The difference between cash and accrual basis is cash basis requires taxes to be prepared based on monies received and spent during a given tax year. Accrual basis requires your taxes to be filed based on monies earned, but not necessarily paid to you, as well as the expenses they incurred. For a trucking company, it’s likely better to be on a cash basis because most of a trucking company’s receivables outweigh their liabilities.
As an Over the Road (OTR) professional, you are eligible for deductions related to meals and entertainment expenses by way of a Per Diem. Per Diem rates are set by fiscal year, effective October 1 each year. Truck drivers subject to DOT Hour of Service Rules could deduct 80%. However, if your company pays drivers a per diem then the driver can’t deduct the per diem too.