Tax Deductions for Owner Operator Truck Drivers

Tax deductions for owner operators reduce the amount of self-employment tax and income tax associated with the income reported to the IRS. Self-employed or statutory employees generally file tax deductible business expenses on Schedule C with reported income. Drivers should keep good records and receipts to substantiate any deductions taken.

What Type of Expense Can Be Deducted?

Expenses related to your business are typically tax deductible if you are self-employed. Here is a list of some of the items you might be able to deduct:

  • Vehicle expenses, such as tolls, parking, maintenance, fuel, registration fees, tires and insurance
  • Trade association dues or subscriptions to trade magazines
  • Flat-rate taxes
  • Travel expenses, if incurred while being away from your tax base
  • Licenses and regulatory fees
  • Specialized work gear, such as goggles, boots or protective gloves
  • Electronic devices, if only used for work
  • Sleeper berth equipment, such as an alarm clock, bedding, curtains, cooking equipment and first aid supplies
  • Work related fees for drug testing, DOT physical and a sleep apnea test (If required for work)
  • Fees paid to a dispatch service
  • Leasing costs

Don’t forget the standard deductions available to anyone, such as child and dependent care, lifetime leaning credits and the child tax credit.

Know Your Tax Home

To claim travel expenses, you must be traveling away from home. Typically, local drivers aren’t going to be able to deduct travel expenses, but it depends on a few factors. You should determine your tax home to calculate whether you’re traveling away from it or not.

Your tax home is the city or general area where you work, according to the IRS. For self-employed drivers, this is generally the base or dispatch center where you get assignments, not where you live.

The tax home includes the entire city or general area where the work is located, not just a zip code or neighborhood. A tax home is also the main place of business. If the nature of your business means that you don’t have a regular place of business, your tax home may be where you live.

For most drivers, the tax home is typically where a trip is begun and ended. If you are using a residence as your tax home, make sure that you can show you help maintain the property while you’re away from home. If you don’t maintain a home, you are considered a transient, which means you have no tax home.

To reiterate, you must substantiate your expenses. Keep your receipts and log book to validate the purposes of each travel expense. Back up your log books to ensure you have the information at your fingertips if you need it. Documentation requires time, date and place for each travel day.

Per Diem Expenses

While you can track each expense while you’re on the road, you may also use a per diem, which eliminates the need to prove the actual costs of your expenses when you’re away from home. However, you do need to prove you are working away from your tax base. The most current rates are listed in the IRS Publication 1542, Per Diem Rates. To claim the per diem rate, drivers must:

  • Itemize their tax deductions.
  • Have a tax home.
  • Be subject to HOS regulations.
  • Meet the overnight rule. Essentially, this means that a driver cannot complete a trip within a single day.
  • Maintain documents that they were away from home for every day a per diem is claimed.

Per diem covers meal expenses and incidentals, such as tips and fees. You should still keep receipts for hotels, showers, laundry and other costs. These expenses are deductible.

Maintaining Good Records

Self-employed truck driver tax deductions are a great way to help reduce your tax bill, but you do need to substantiate these expenses. Here are some suggestions to help you stay organized through the year:

  • Keep a file to sort receipts by month or by trip. Don’t just put all your receipts into a folder and expect to sort them out in January. Spend a few minutes each week organizing your information to be ready at tax season.
  • Store log books in the Cloud and on a hard drive. Dropbox and Google Drive are just two secure places to store your information.
  • Use an app to maintain receipts and trip information or make notes on each receipt to help you stay organized in case your filing system becomes messy.

Tax Rules Fluctuate From Year to Year

Be sure to check the rules at the start of the tax year to know the requirements and deductions you can take. This can help you get organized and not miss out on any tax breaks. For more owner operator tax tips, ask your tax professional to review your accounts.

Security Tips for Trucking Companies

The trucking industry is a prime target for theft and criminal enterprise. Thieves look for vulnerable trucks where cargo can easily be stolen. Fortunately, drivers can take measures to protect valuable cargo. Low-tech measures, such as king pin locks, glad hand locks or fuel-line shut-offs might slow the bad guys down, but aren’t always enough to protect a truck.

Security Starts With Awareness

Tight security for truckers starts before drivers ever get into the cab. Training employees about security issues can help them be more aware and understand why certain procedures are so important. Here are some tips to help your company implement solutions to cargo theft

  1. Use technology to route shipments. GPS tracking systems can now send a security alarm to the company if a truck goes off its route. Factor in security when routing. Avoid hot spots where cargo theft is higher.
  2. Have drivers maintain regular contact with dispatch.
  3. Keep cargo moving, because it’s more likely that a load will be stolen when it’s unattended. Teams are recommended to help keep cargo on the road and to give drivers another person to lean on when tired or losing focus. If a team isn’t a possibility, drive in tandem with another truck.
  4. Never leave trucks unattended or allow drivers to take a load home. Emphasize that drivers should always stop in well-lit places or a secure yard.
  5. When parking, put trucks tail to tail to prevent rear trailers from being opened with goods on board. Alternatives to parking tail to tail include parking against a building or another object that doesn’t allow the door to be opened.
  6. Offer specialized training against cargo theft. Teach drivers what to look for and how to drive with increased awareness.
  7. Make sure drivers know to be careful about what they say. Don’t talk about the cargo in the truck or give out route information, especially on the CB.
  8. Ensure all drivers follow delivery and pickup protocols. Make sure drivers request ID from personnel who unload trucks. Audit protocols periodically.
  9. Check for dishonest employees. Run background checks on all employees who have access to shipping and routing information. Watch for employees who are loose with standards and don’t allow security breaches to go unnoticed.
  10. Use low-tech measures. Drivers should take the keys with them when the truck is unattended and doors need to be locked. Before walking away from a trailer, check locks. It’s easy to be talking to someone at a rest station and forget.
  11. Be suspicious of people who claim you hit their car. This is a ruse that thieves use to get people to stop.
  12. Work with other trucking companies to get information about potential issues in your community and industry. Alliances can really increase the safety of cargo and drivers because you work together to prevent theft.
  13. Many thefts occur close to pickup points and terminals. Be extra careful after picking up a load. Give drivers time to get away from the pickup point before stopping.

When All Else Fails

Fleet owners should have a plan in case a driver is hijacked. Giving the load over to a thief is generally preferred than getting hurt or worse to protect the freight. Instead of fighting, teach drivers to be a good witness to give law enforcement a better chance at apprehending the criminals.

Observe everything. Don’t just look at what is happening but pay attention to sounds and what is being said. Notice details. Keep a business card with company information and contact phone numbers in your wallet or on your person. Notify the authorities immediately.

Cybersecurity Issues

It doesn’t matter whether your company is small or large, cyber threats are a growing problem in today’s business industry. Hackers aren’t only trying to steal information or data. Some just want to create chaos by disrupting the infrastructure of an important industry. Cyber security for fleets has to be a priority. Here are some tips to help your company create and maintain a plan that prevents security issues:

  • Train employees to generate strong passwords and to recognize phishing emails
  • Have a way to encrypt emails which contain secure information
  • Use best practices for security protocol
  • Use comprehensive antivirus and malware programs
  • Update software and operating systems for security patches
  • Limit password attempts
  • Be proactive in maintaining your website and OS
  • Backup your software
  • Have a disaster recovery plan in place
  • Review your IT department and update as necessary

Audit Your Security Infrastructure

Don’t be afraid to check drivers and other employees to ensure that they are operating securely. You may find gaps in your plan by conducting audits. Talk to others in the trucking industry to find out how their businesses are operating safely. Make safety and security part of your regular risk management plan to prevent theft or hacking.