The new tax laws that were passed in December 2017 include good news and bad news for trucking drivers, but mostly good news for independent owner-operators. While nothing changes for the tax year 2017, starting in 2018 company drivers will no longer be able to itemize their expenses. This law will dramatically change the number of itemizations a driver is entitled to deduct, especially per diem expenses, which traditionally has reduced drivers’ taxable income and put more refund money into their pocket.
In the past, drivers were able to deduct per diem and other expenses, such as:
- Mobile phone and service
- Work boots
- Bed linens for the sleeper
- Other necessities required for on-the-road travel that was not provided by their company.
These itemizations disappear under the new tax law. However, don’t panic! The standard deduction that everyone is entitled to has almost doubled to $12,000, which should help offset the impact of the loss of the expense deductions, but it doesn’t offset all of it.
Luckily enough, there is a workaround.
Fleets will still be able to deduct the per diem that the company pays drivers as part of their wage. If a driver is paid per diem, a percentage of the cost will be per diem wage that is not taxed. Under the old laws, per diem paid to the driver by the company was almost always added back in because it needed to be reported to the IRS as income. Since this could be itemized by the driver, it made sense to claim this as income. But under the new law, per diem reimbursement pay can be written off by the company as part of their corporate expense. Everybody wins if the company chooses to operate this way.
Independent owner-operators and small fleet owners will still be able to itemize per diem deductions. They will also receive a 20 percent tax break, which will save them even more money. As long as trucking companies raise the amount of reimbursement per diem paid to drivers as wages, everyone will come out ahead under the new tax reform laws.
Regardless of the type of trucking company you operate, it is imperative that you seek out the services of a reputable tax preparer that is knowledgeable about the trucking industry. And, by the same token, it is vital that you seek out a reputable insurance carrier that understands the trucking industry. Click here to learn more about how the experts at Cline Wood can help you manage your risk.
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