Do you know what business-related expenses you should be tracking to maximize your tax deductions? If you are an owner-operator truck driver or an independent contractor, you can significantly lower your taxable income or self-employment tax liability by handling your tax returns correctly.
Unlike truck drivers who work for companies as an employee, you don’t receive a W-2 form detailing your earnings and deductions. Drivers must use form 1099 along with Schedule C to report their own income and expenses. Staying organized can bring you a pretty juicy payoff in your taxes, and we are here to make sure you don’t miss out on anything.
This article will go over the top 18 tax deductions for truck drivers. You can also check out the best tax software for truck drivers if you need help with saving money on your tax returns.
Note: If you want an automatic way to track and organize your business expenses, try Bonsai Tax. Our app scans your bank/credit card receipts to discover tax write-offs and categorizes them neatly for the IRS. On average, users save $5,600 from their tax bill (that's a lot of money back in your wallet). Claim your 7-day free trial here.
What Are the Most Common Self-Employed Truck Driver Tax Deductions?
While it may seem difficult to keep track of every single expense related to your work, remember that even small purchases can quickly add up and become costly. Here are some of the most common business expenses for a self-employed truck driver.
Truck drivers usually keep track of routes, working hours, inventory, and even signed receipts after delivering cargo. Any office supplies needed for these admin tasks are tax-deductible.
Traditional office expenses for a truck driver include faxing and photocopying, paper, pens, postage, calculators, maps, and logbooks. You can also deduct the costs of accounting software, such as Bonsai Tax, to help you keep track of your business-related expenses and tax deductions.
If you run your trucking business from home and you have a designated space in your house to do all your administrative work, you may be eligible for a home office deduction. To claim this deduction, drivers must meet strict requirements such as using the area exclusively and regularly for work.
You can choose to claim a deduction under the home office simplified method, or the regular method. With the simplified method, you can deduct a flat rate per square foot of home used exclusively for work while the regular method requires you to itemize your expenses.
If you choose the regular method, you can deduct a percentage of your home expenses including repairs, utilities, mortgage interest and insurance. The calculation of your deductions is based on the percentage of your home used exclusively for work.
For example, if your home is 2,000 square feet, and you have a small office space of 200 square feet, you are using 10% of your home for business purposes. You will be able to deduct 10% of the expenses you itemize on your tax return.
As a condition of their work, many drivers are required to get medical exams done regularly. Medical expenses for truck drivers include physical evaluations, drug tests, and even sleep apnea studies. If the hiring party does not reimburse these costs, they are fully deductible as a business expense.
Section 1795 of the IRS allows business owners to deduct most purchases of depreciable equipment, including your electronics. The entire cost of mobile phones, computers, laptops, GPS units, GPS Maps Updates, CB Radio, and repair is deductible as long as they are used fully for the purpose of your trucking business.
For 2021 the maximum deduction you can take is $1,050,000 and the maximum value of the property purchased of $2,620,000. To take this deduction, the equipment must be purchased, financed, or leased by December 31, 2021.
Note: If you want to track all your tax deductions automatically in one place, try Bonsai Tax. Our app makes saving money and filing your tax return a breeze. The software records deductions, allows you to estimate your taxes (after you put in your estimated income), and sends you filing reminders. Try a 7-day free trial here.
As a truck driver, you spend your days and nights on the road and traveling away from home. This means keeping track of travel expenses such as meals, lodging, and incidental costs because they are deductible. Therefore, the IRS applies a standard “per diem rate” for workers in the transportation industry to be able to deduct business travel expenses as work-related expenses.
The per diem rate consists of a daily lodging allowance plus daily meals and incidental allowance. For 2021, the daily allowance is $95 for lodging + $55 for meals and incidentals. In other words, you can deduct a daily travel expense of $150.
You can only deduct travel expenses as a truck driver if you are driving away from your tax home, which is your main place of business. This may be different from your family home, so you must keep this in mind when reporting your travel expenses.
For example, as an independent truck driver, your tax home may be at the headquarters where your trucking assignment is given out, even if this is far from your home. For this reason, local drivers cannot deduct travel expenses because they can eat at home. To learn more about the standard meal allowance/ travel costs for truck independent contractors, visit the U.S. General Services Administration website.
Today's sleeper berths are well-equipped, big, and designed to be comfortable places to sleep or rest during your 10-hour break. But did you know you can deduct the entire cost of the items used in it? Most truck drivers don't.
Although these may seem like personal products, you can take a deduction on your bedding, cab curtains, alarm clock, mini-refrigerator, and first aid kit. Just keep your receipts and include the expenses on your itemized deductions.
The actual expenses method requires you to itemize your vehicle expenses. You must keep track of the costs you incur while using your truck for work. These include parking fees, tolls, oil, garage rent, and registration. Using this method, you have to report each expense separately and keep all your receipts as proof.
With the standard mileage method, you can deduct a flat rate per mile driven exclusively for work. The standard mileage rate for 2021 is 56 cents per mile.
The standard mileage method is available for other types of vehicles used for work, but this is not the case for truck driver tax deductions. Because your mileage will probably be very high, you can only use the actual expenses method to take this tax deduction.
Protective Equipment and Uniforms
Truck drivers can claim a tax deduction for the cost of buying, cleaning (laundry), or mending any uniform distinctive and unique to their job or work environment. Additionally, any clothing truck drivers wear to protect themselves from risks or injuries specifically related to their work duties is eligible for tax deductions.
This clothing must have protective functions or features such as steel-capped boots, masks, gloves, safety glasses, or rain gear. Keep in mind you cannot deduct tax everyday wear (such as jeans, t-shirts, or sneakers) as a job-related expense, even if you use it exclusively for work. That's why you can write-off protective clothes for work.
For example, a client requires you to wear their logo-embroidered t-shirt and full-length pants while driving for them. If you buy 2 company t-shirts and some jeans, the cost of the t-shirts will be deductible because the logo makes it unique to the organization you will be working for. However, the cost of the jeans cannot be deducted as they are considered conventional clothing.
Equipment and Tools
You can also claim tax deductions on any tools or equipment necessary for your truck driver duties.
Alarm clock/cleaning supplies
If the tools are used for both personal and business purposes, truck drivers can only deduct the work-related use of the item.
License and Association Dues
The costs of obtaining (and maintaining) your Commercial Driver License are tax-deductible, including training programs and continuing education. Suppose you are required to be a member of a trucking association (such as the American Trucking Associations), to get a contract or a job. In that case, you can use any required fees such as association dues as deductibles on your tax return.
Even if this association is not required to get a job, truck drivers can still claim the deduction as long as you prove that being part of the association helps improve your career as a truck driver. Reimbursed expenses by your client cannot be deducted.
Internet and Cell Phone Services
Truck drivers often use their cell phones for both personal purposes and for work. For this reason, the IRS only allows a cell phone tax deduction of up to 50% the expenses incurred. This deduction also applies to Internet services you may use on your cell phone, laptop, or any other device.
Repairs and Maintenance
This is one of the largest available tax deductions for truck drivers. You can claim the costs of repairing and maintaining your truck as a work-related expense. The deductible expenses include cleaning supplies used for maintenance (vacuums, trash bags, window cleaner, paper towels, etc.), batteries, trucking parts, tires, and mechanical repairs.
Keep in mind, you won’t be able to deduct the labor costs of repairing the truck yourself, but you can still deduct the cost of parts and tools you used for the repair. The repairs and maintenance costs are eligible for tax deductions regardless of ownership, whether the truck is leased, owned by you, or by a company.
If you are leasing the truck you use to provide your independent truck driver services, you can deduct 100% of the leasing payments from your taxable income. However, most truck drivers will likely have to make a down payment as a security deposit if you are leasing from a dealer. This security deposit payment is not subject to a tax deduction for truck drivers.
Vehicle and Cargo Insurance
Typically, a trucking company (or you as an independent truck driver) must maintain a commercial auto liability and property damage insurance on your truck. In addition, you should also consider insurance to cover cargo or any income lost resulting from a business interruption.
The costs of these insurance premiums are considered operating costs and are 100% tax-deductible for truck drivers.
Child and Dependent Care Tax Credit
As a truck driver, you spend a lot of time away from home, and whether you are a single parent or your spouse also works, you probably use childcare services several times a month. Luckily, your child and dependent care expenses are eligible for the tax credit.
To qualify for the credit, your children must be under the age of 13. In 2021, you can claim up to $4,000 in expenses per dependent with a maximum of 2 dependents, and get those expenses back as a tax credit. You can also claim a dependent tax credit in the case of disabled spouses or children regardless of their age.
A tax credit will reduce the amount of tax you owe instead of the income you are taxed on. For example, if you owe $2,000 in federal taxes, but you claimed $3,000 in nanny expenses incurred for the year, you would get 50% ($1,500) of those expenses back as a tax credit and only have to pay $500 of taxes for that year.
Casualty Financial Losses
Suppose you suffer an accident, theft, flood, fire, or any other casualty during the year. In that case, you can claim a deduction on the financial losses that were not reimbursed by your insurance company. Your loss must be reported on IRS Form 4684 under Section B as an income-producing property.
For tax purposes, “casualty” refers to property damage, loss, or destruction of property due to a sudden, unexpected or unusual event. Therefore, truck drivers cannot claim a deduction on the loss due to slow and progressive deterioration.
Subscriptions to Trade Publications
You can deduct the costs of your subscriptions to newspapers, magazines, newsletters, journals, or similar products, including website subscriptions. However, these subscriptions must be to professional, technical, and trade publications related to your profession.
For example, you can deduct the cost of subscribing to the American Trucker Magazine, but not to the daily newspaper or a general interest magazine. If you subscribed to a publication that helped you find a job, you can also take a deduction as a job search expense.
Truck drivers are also allowed to deduct a portion of their music streaming subscriptions like Spotify.
Self-Employment Retirement Plans
Being a self-employed truck driver can give you a lot of freedom, but that should not be an excuse to skip out on retirement savings. In fact, you have many options for a retirement plan, even on a freelance income. The good news? You can deduct your yearly contributions from your taxable income.
For example, on a Solo 401(k) plan, the contribution limit for 2021 is 19,500 or $26,000 if you are 50 years and older. If you make $60,000 this year but contributed $6,000 to your retirement plan, you will only pay taxes on $54,000. This is one of the best retirement plans for independent contractors and company owners with no employees.
What It Comes Down To
When it comes to avoiding 1099 tax payments, two major factors make truck drivers' expenses deductible; Whether they’re ordinary and necessary, and whether you have a record of the expense. “Ordinary” refers to an expense that is common and accepted in your industry. “Necessary” means that it is helpful and appropriate for your job. These deductions include items such as log books, safety gear, GPS units, cargo straps, etc.
In general, you cannot deduct personal, family or living expenses. However, if you have expenses for something that you use partially for personal and business purposes, you can deduct the business part.
For example, suppose you get a $70,000 loan and you use $50,000 (71%) to buy a used semi-truck for your trucking company. Say you use the other $20,000 on a kitchen renovation. You will be allowed a deduction on 71% of the loan interest, but not the other 29% that was used for personal purposes.
Owner-operators cannot deduct expenses for downtime. However, owner-operators can claim deductions for expenses that incurred related to driving their truck such as fuel and tolls.
Let me give you a couple of final tips and tax hacks to make sure you get your filing right.
Tips For a Smooth Tax Year
Know your deadlines. Your company structure, whether you chose to be a sole proprietorship or LLC, will determine your tax filing deadline. If you fail to file your tax return on time, you can face a penalty of 5% of the tax you owe for each month, with a maximum of 25%.
Start preparing your documents early. You probably have some things you put off, but procrastination can be very harmful when filing taxes. Don’t wait until the last week to start gathering information and documents resulting in inaccuracies or mistakes. You are also most likely to miss out on tax deductions if you are on a tight deadline.
Stay organized. This might be the most difficult part of tax filing, but if you keep your documents and tax records together throughout the year, tax season will be a piece of cake. You can use Bonsai’s tax receipt organizer to scan your receipts and keep them in place, ready for when you need them.
Keep backup records of your tax receipts. Getting audited by the IRS and not having your tax receipts in order is not going to be pretty. Receipts are considered the primary evidence to prove your deductions and lower your tax liability. So, if you want to survive an IRS audit, make sure to keep backup information for at least 3 years.
Get tax software for truck drivers to stay on track. You already spend a lot of time on the road, you don’t have to spend a lot of time doing your taxes too. The Bonsai team can certainly help you with that. We can help you with invoice templates and payments as a freelancer, track receipts, as well as estimate your quarterly tax payments.
Make filing your tax returns easier with the best independent contractor app out there; Bonsai Tax.