As the saying goes, only three things are constant in life. One of them is taxes. Everyone pays them whether directly or indirectly.
Almost everyone who works must submit a tax return to the IRS, including those who have less knowledge about taxation like truck drivers.
While taxes help fund social services and government projects, they can hurt anyone’s financial bottom line. This is especially true among truckers who spend many hours on the road, but others take home less than $55,000 a year.
Fortunately, more accounting firms now specialize in truckers’ tax service. Consultations may be performed online for ease and convenience, while professionals can guide drivers on filling out forms and filing. Truckers can also lower their tax dues by making the most of the possible deductions:
The simplest way to reduce tax liability is to claim a standard deduction. It is a flat rate that varies depending on the status of the person upon filing.
The figures can also change over time, although the good news is it has been increasing through the years. For this year, single taxpayers and married couples filing separately can claim a $12,550 deduction. A year before that, the taxable income threshold was $12,400 for these groups.
Meanwhile, couples filing jointly can claim twice the amount or $25,100. Those who declare themselves as heads of household (single filers with dependents) may reduce their taxable income by $18,800.
But there are caveats. First, a truck driver who claims standard deductions can no longer reduce their liability with itemized deductions. That’s why drivers may benefit from working with tax experts. They can better decide which type of deduction lowers their tax due better.
Second, couples filing separately still need to agree on the kind of deduction they want to claim. Lastly, one may not use a standard deduction if they are a nonresident alien or they file the return for a period of less than a year because of changes in the accounting period that can affect income.
Itemizing tax deductions is tedious. However, the total claim may be higher than the limits of the standard deduction, which means truck drivers can save more money with this type.
The kinds of deductions truckers can claim depend on whether they are self-employed or also operate their truck or they are employed as drivers. Tax specialists can help them determine which ones are suitable for them.
In general, they can decrease their taxable income with the following:
1. Vehicle Expenses – Almost all expenses a trucker can incur for the vehicle can be tax-deductible. These include parking and toll fees, repair and maintenance, registration fee, insurance premiums, and interest on loans. They can also claim depreciation, which is extremely helpful as commonly used vehicles may have a higher depreciation rate.
2. Travel Expenses – These are travel-related costs related to the job or when the driver is far from home. This is defined as being away from your tax home for more than a day and sleeping in another location because of the job.
These deductions may cover laundry and lodging. When it comes to meals, usually, only the owner-operator can claim this. Moreover, the IRS limits the claim up to 50% of the costs of these business meals.
3. Other Taxes and Fees – Truckers may also reduce their taxable income with some taxes and fees they paid. One of these is the excise tax levied on manufactured goods. They may also claim deductions on federal and state fees and government licenses.
4. Supplies – Anything considered helpful or necessary to the performance of the job may also be tax-deductible. Often, this refers to truck and office supplies and equipment.
Thus, truckers can spend less on their tax due by knowing their spending on paper, logbooks, pens, printers, fax machines, and telephones. They can also claim deductions on coffee pots, fire extinguishers, and ice scrapers, which are common trucking tools.
5. Medical Expenses – Studies show that because of the lifestyle of truckers, they are at a higher risk of developing chronic conditions. But regular exams and treatments can be expensive.
Fortunately, the IRS allows taxpayers to itemize expenses paid on medical and dental care for oneself, their spouse, and dependents. One can claim only the amount that is over 7.5% of their adjusted gross income (AGI).
Note that any expense reimbursed by the trucker’s employer cannot be itemized for deductions. But even if they cannot maximize these costs anymore, they can still claim a variety of expenses. With the help of a trucking specialist, they don’t have to miss anything.