Tax Deductions for Owner-Operators

If you are an owner-operator in the trucking industry, you may be eligible for various tax deductions that can lower your taxable income and save you money. However, you need to be aware of the rules and requirements for claiming these deductions, as well as the best practices for keeping track of your expenses and filing taxes.

What are Tax Deductions?

Tax deductions are expenses that you can subtract from your gross income to reduce your taxable income. This means that you pay less tax on the income that you earn from your trucking business. However, not all expenses are deductible. You can only deduct expenses that are “ordinary and necessary” for your business, meaning that they are common and accepted in the trucking industry and that they are helpful and appropriate for your business. You also need to have proof of your expenses, such as receipts, invoices, bank statements, or mileage logs.

Some Common Tax Deductions in Trucking Include:

• Fuel and oil costs
• Vehicle maintenance and repairs
• Tires and supplies
• Depreciation or lease payments for your truck
• Insurance premiums for your truck and cargo
• License, registration, and permit fees
• Tolls and parking fees
• Travel expenses, such as lodging, meals, and laundry
• Office expenses, such as phone, internet, computer, and software
• Accounting and legal fees
• Education and training expenses
• Health insurance premiums
• Retirement plan contributions

Remember, expenses that are “ordinary and necessary” are usually deductible come tax time for owner-operators and some of these deductions may have limitations or special rules. When deducting these trucking expenses, it’s important to keep receipts. Many of these expenses may show up on your settlement statements, so be sure to keep them in a folder and enter them into a bookkeeping program. If you don’t have a receipt, be sure to record the expense in your log-book. If your drivers find it difficult to keep receipts, you can use a credit card or fuel card statement as substantiated information. Just be sure to make notes about the transaction.

How to Keep Track of Expenses

Keeping track of your expenses is essential for claiming tax deductions as an owner-operator. You should keep a record of every expense that you incur for your business, including the date, amount, description, and purpose of the expense. You should also keep receipts, invoices, bank statements, or other documents that support your expenses. You can use a spreadsheet, an app, a software, or a notebook to organize your expenses and categorize them by type. You should also keep a log of your mileage, including the date, destination, purpose, and odometer readings of each trip. You should keep your records for at least three years after you file your tax return, or longer if you are subject to an audit or a claim.

Tax Tips for Owner-Operators

• File your taxes on time and pay your taxes in full. If you cannot pay your taxes in full, you can request an installment agreement or an offer in compromise from the IRS. You should also pay your estimated taxes quarterly to avoid penalties and interest.
• Keep your personal and business finances separate. You should have a separate bank account and credit card for your business, and avoid using them for personal expenses. This will make it easier to track your income and expenses, and to prove your deductions.
• Hire a tax professional or use a reputable tax software to prepare your tax return. A tax professional or a tax software can help you maximize your deductions, avoid errors, and comply with the tax laws. They can also represent you in case of an audit or a dispute with the IRS.
• Stay updated on the tax changes and regulations that affect your industry. The tax laws and rules can change frequently, and you need to be aware of how they affect your business and your tax obligations. You can subscribe to newsletters, blogs, podcasts, or webinars that provide relevant and reliable tax information for owner-operators.