Top 3 Tax Problems for Truckers

Each tax season leaves thousands of truck drivers with hundreds of thousands of dollars in tax deductions on the table. This is largely due to inadequate planning and poor accounting. In addition, many tax professionals do a poor job of properly informing trucks about the variety of tax breaks available to them. Truck drivers have access to many different tax deductions and credit, but the three main areas that cause tax liabilities include depreciation, daily allowance and cash vs. cash. accrual.


Generally, it requires a huge upfront investment to buy or lease tractors and trailers. Often the owner / operator finds start-ups comfort in the financing due to up to five-year lease terms, which really helps control costs and cash flow. The problem is that according to the Internal Revenue Code (IRC) regarding depreciation, you only have three years on tractors and trailers. In other words, you can only claim depreciation for three years on tractors and five years for trailers. As a result, many owner-operators end up paying for equipment long after the depreciation tax deduction is used up. Another challenge is how the Internal Revenue Service (IRS) shows depreciation. For example, if you buy a $ 50,000 tractor, it is possible to write off $ 16,665 the first year, $ 22,225 the second year, $ 7,405 the third year and only $ 3,705 the last year. This means that your total tax liability is significantly increased in the third year you own the equipment. Often, tax professionals fail to inform the owner / operators that their potential tax liability will increase dramatically in the third year. This leaves many with huge tax liabilities that they had no plans for and could not afford to pay.

Cash vs. Cash accrual

Did you know that the IRS has special rules that allow trucking companies to be cash when other companies should require accrual? The difference between the cash and accrual basis is the cash basis, which requires the preparation of taxes based on income and the amount of money in a given tax year. Accrual basis requires your taxes to be recorded on the basis of the amount earned (whether you receive it or not) and expenses they incurred (whether you actually paid them or not). It is advantageous to say the least that trucking companies are cash because most of the claims of a trucking company outweigh their obligations. Let’s look at a scenario. Generally, customers pay trucking companies thirty or more days out, but if you have employees, you probably pay them weekly. So, in fact, you pay expenses faster than you pay yourself. If you are on an accrual basis, you will not benefit from the above special available rules.

Per Diem

Most of you already know that you work from home, you may be eligible for deductions for meals and entertainment expenses. Generally, deductions occur in one of two ways. One way is to keep track of all your receipts for meals and entertainment expenses incurred during the year. The other way is to use the diem method. The rates for unemployment benefit are determined by the financial year, which comes into force on October 1 of each year. These rates vary by zip code ($ 89.00 dollars were standard for 2015-16) The IRS allows you to deduct a certain amount per year. Today, without having to keep track of receipts. However, it would be prudent to keep your receipts anyway, in case you need to prove that you were actually on the road during the period under investigation. Most taxpayers can only deduct 50% of these expenses, while truck drivers covered by DOT Hour of Service rules could deduct 80%. Be aware that situations vary. For example, if your company pays motorists a daily allowance, the driver cannot deduct the daily allowance.

Only the company is eligible for deduction in this case. As a result of daily deductions, your specified deductions may be limited. The allowance deduction is most favorable when used by owner-operators who can deduct these expenses in Schedule C against their income.