The Best Tax Software For Truck Drivers - Bonsai Tax

11

Min Read

Maria Malyk

Truck operators spend a lot of time in transit. And while this lifestyle is bountiful with beautiful scenery, social camaraderie, and the spirit of freedom and adventure, when it comes to tax book-keeping, being "on the road" translates into a lot of misplaced receipts.

Considering that truckers' expenses on the road can really add up, lost evidence of those expenses spells out missed opportunities to deduct tax expenses, which spells out having to pay more in income taxes to the Internal Revenue Service!

Luckily, the Bonsai Tax accounting software can easily keep track of receipts as well as other tax materials relevant to truckers and ensures that the taxpayer stays on track with collecting and scanning in all the relevant receipts as they come in.  

If you are an independent truck driver/owner-operator of an over-the-road (OTR) trucking business, read on to learn:

  • which taxes you are responsible for paying
  • which tax deductions you are eligible for/how to maximize tax deductions on your tax return
  • what you can do to simplify and optimize the whole process of expense tracking and tax filing by utilizing the best digital tax receipt organizer for independent contractors/small business owners -- Bonsai Tax.

Note: Claim your 14 day free trial of our tax receipt organizer as well as our other invoicing and contract tools. The average user of our receipt tracking software saves $5,600 from their tax bill.

What Type Of Taxes Does A Trucker File?

Both truck owner operators and, in the majority of cases, the drivers that are hired to haul the freight load for them are considered 1099 independent contractors (though a small percentage of truck drivers are W-2 employees at trucking companies).

As self-employed workers, all drivers of freight trucks are responsible for filing quarterly estimated tax payments as well as end-of-year tax returns with the IRS for two main categories of taxes: income tax and self-employment tax.

Income Tax

Independent contractors pay both federal and state income taxes.

The federal tax to residents of all 50 U.S. states, with new tax brackets set by the IRS every year.

Different states set their own state tax brackets each year. In 2021, the state individual tax structures are distributed as follows:

  • U.S. States with no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming
  • U.S. States with a flat-rate tax for all incomes: Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, New Hampshire, North Carolina, Pennsylvania, and Utah
  • U.S. States with various graduated-rate tax brackets for different incomes: Alabama, Arizona, Arkansas, California, Connecticut, Delaware, Georgia, Hawai'i, Idaho, Iowa, Kansas, Louisiana, Maine, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont, Virginia, West Virginia, Wisconsin, and Washington DC

Bonsai Tax digital accounting tool can easily calculate your federal and state tax estimates based on the data you enroll into its cloud-based online account.

Self-Employment (SE) Tax

As a trucker, you are also expected to pay a SE tax which, in 2021, is set at 15.3%  (12.4% for Social Security and 2.9% for Medicaid).

SE taxes apply to 92.35% of your net earnings from being self-employed.

Bonsai Tax can calculate your SE in a blink of an eye. Try our 1099 self-employed tax calculator.

IFTA Tax

This does not apply to the majority of the trucker community -- however, owner operators who are involved in a long-term lease (30+ days) with a carrier company may be additionally responsible for paying quarterly "fuel taxes" to the jurisdiction state in which their business is registered.

The International Fuel Tax Agreement (IFTA) is an agreement that exists between 48 U.S. states and ten Canadian provinces -- expressed as a tax collected by the carrier's domicile state, to be used toward infrastructure (i.e. maintenance/repair of roads, which are damaged at an accelerated rate thanks to tractor-trailer traffic).

Before IFTA, carriers had to calculate taxes owed to each individual state in which they operated a commercial vehicle: now, thanks to the agreement, the process has been streamlined for all U.S. states/Canadian provinces involved. The fuel taxes are proportional to miles driven in each state/province.

If you are an owner operator of a leased IFTA-qualifying vehicle that delivers goods between different IFTA-signed jurisdictions, you are likely responsible for getting an IFTA license with decals (to be renewed every year) and to file IFTA taxes.

You are required to file IFTA reports if your trucking business checks off any of the following conditions:

  • your truck has gross vehicle weight of 26,000+ lbs
  • your vehicle has 3+ axels
  • your vehicle crosses state lines in transporting product loads

Figuring out your IFTA taxes necessitates keeping a methodical record of your state-by-state mileage for each quarter's report, as well as holding on to all fuel receipts.

Bonsai Tax Slays Quarterly Tax Estimates

The above tax-related responsibilities may sound like a lot of paperwork and math -- and it's true: they are a bit much... Luckily, unlike in the olden days, you can turn to an accounting tool that will take the majority of that burden off of you!

With Bonsai Tax accounting software/app, you answer some simple questions and enroll your earnings into the online app and Bonsai tax software sorts these data into appropriate graphs in the appropriate tax forms -- and generates quarterly tax payment estimates, so that you never accidentally underpay on the basis of an inaccurate guess (and incur penalty fees for it). And, of course, Bonsai Tax can help you with filing your annual tax return as well.

Note: Our software will automatically send you payment reminders as well as give you quarterly tax estimates based on your earnings. Try a 14 day free trial of our app here.

What Kinds Of Tax Deductions Can A Truck Driver/Owner Operator Claim From Business Expenses?

As a self-employed trucker, you are entitled to deducting expenses related to your business.

Here are the essential rules of thumb to successful tax deductions:

  • the expense must be directly related to/necessary for your business
  • the expense must be reasonably priced -- i.e. cannot be exorbitantly overpriced
  • you must hold on to all your original receipts as evidence for each itemized expense write-off

The most common deductible expenses for a trucking independent contractor are:

Traditional office expenses

This includes (but is not limited to) writing utensils, printing paper and stationary, calculators, postage, cost of accounting software (such as Bonsai Tax), photocopying/printing costs, even desk and chair, if they are used exclusively for trucking business purposes.

Cell phone/computer/tablet

As long as you use this technology exclusively for business purposes, you can write off the full price of the device intern(s) and the internet/data plans that come in tow; if you alternate personal and business use on these machines, you can only deduct the work-related cell phone bill percentage of total expenses.

Association membership dues

Many truckers belong to labor associations: the membership fees may be deductible, as long as they are related directly to enhancing one's occupational skills/standing/networking.

Tools / equipment

This applies to trucking industry-relevant tools of the trade and necessary materials, such as tire irons, bungee cords, tarps, ratchet straps, etc.

Specialized gear

If your job necessitates safety gear, such as a back brace or safety goggles, florescent vests, etc., you can deduct those purchases.

Meals

Food consumed while away on driving jobs is only deductible for truckers who are gone overnight from their "tax home" (the region where your business is based). It follows that short-distance drivers are not eligible for meal deductions, while long-haul drivers are.

There are two ways for trucking professionals to claim their on-the-road meal deductions:

  • The Actual Expense Method. This is the itemized expense reporting approach, based on holding on to all meal receipts (including tips/tax). Drivers of trucks adhering to the Department of Transportation's "hours of service" limits are allowed to claim 80% of their actual food expenses (read more about the actual expense method vs the Standard mileage rate)
  • The Per Diem Allowance.  This is the simpler approach of getting a flat, fixed allowance per day, bypassing much of the record-keeping necessary for the "actual expense method". In 2021, trucker per diem rates are set at $66 for any travel locality within the continental U.S. and $71 for outside the continental U.S.

Lodging

The IRS sets hotel per diems for other industries but not the trucking one! Drivers of trucks are expected to file actual expenses on accommodations (and, like with meals, only overnight trips to a different jurisdiction qualify for a write-off).

Education/professionalization

Even if your job does not cover the cost of truck driver training and licensing, you can recover this cost, assuming it was incurred during the year you are submitting tax returns for.

Subscriptions to media

The total coast of your subscriptions to trucking publications is eligible for a write-off.

Insurance

Trucks require insurance: commercial auto liability, property damage, damaged cargo, lost income due to a business interruption, etc.: all those insurance premiums are deductible as a business expenditure.

Medical check-ups

For many drivers, regular medical exams are mandatory: those and some other out-of-pocket expenditures that go toward work-related medical treatment/clearance qualify for a tax deduction.

Licensing fees

Taxes and licenses you pay in running your business are tax deductible.

Miscellaneous personal products/services

A driver of a semi incurs many costs on the road that are hard to categorized but are certainly purchased for work purposes. From a minifridge to a flashlight to cleaning supplies to bedding to laundromat and shower costs: these expenses qualify for a write-off as long as they directly benefit your business.

Vehicle expenses

You can claim itemized actual expenses of operating a semitruck in the form of:

Can Owner Operators Deduct Truck Payments?

Owner operators who lease their vehicles are entitled to write off the whole amount of each monthly lease payment.

For those who purchased their vehicles, car payments are not eligible for write-offs. However, you can deduct the loan interest from financing your own truck/trailer.

Additionally, owner operators can claim depreciating property, as everything from the truck to the trailer to even the office equipment depreciates with time.

What Tax Deductions Are Not Available To Truckers?

Even though life on the road comes with many necessities, not all expenses can be written off as deductions on tax returns.

For example, you may wear regular clothes when you drive the long-distance routes, but you still cannot deduct regular clothing purchases. Likewise, you cannot write off commuting costs/mileage between where you live and where you work. Your home phone line does not qualify for a deduction, even if you use it for work. Travel expenses and meals incurred on personal trips are not eligible deductions either.

Owner-operators are not allowed to deduct time for "lost income" spent working on their equipment, deadheading, or downtime.

Bonsai Has Your Back With Expense Tracking For Maximal Tax Deductions

Taking advantage of all available 1099 tax deductions is highly recommended for everyone, but doing it "from scratch" and using old-fashioned pen-and-paper methods is quite time-consuming and labor-intensive.

Enter Bonsai Tax -- and deductions become a breeze!

With the Bonsai Tax accounting software, you can keep receipts for taxes or business expenses and track mileage in the same digital account. The software will, when the time comes, factor these data into figuring out the quarterly and annual deductions.

Throughout the year, Bonsai Tax will generate real-time expense/profit and loss reports, so that you can get the big picture of your incoming/outgoing expenses and budget better on the basis of this data. The Bonsai accounting software can handle multiple foreign currencies: so, if some of your expenses are in Canadian dollars, the app will take care of the conversion rates for you.

Systematic Business Accounting Is Essential For Truckers

Based on the above information, it is painfully obvious that the most sensible tax-keeping favor a trucker can do for themselves is to save the heck out of all their expense receipts!!

And those receipts need to be organized and tracked in some fashion.

Gone are the days of being buried in massive amounts of paper with numbers all over it. Today, you can take all your receipts and scan them into Bonsai Tax's online receipt app on an ongoing basis (so that nothing ever piles up) -- and the accounting software will sort them into appropriate tax deductions categories and keep track of them from there on in digital form (so you can recycle the hard copies and avoid accumulating paper clutter).

Bonsai Tax: The Best Accounting Software For Truckers/Owner Operators

Unlike regular accounting tools like Quickbooks, Bonsai's tax preparation software/app spares you the cumbersome calculations of cost per mile and other operating expenses for contractors in the trucking business. With the Bonsai Tax software, your main task is to keep scanning your expense receipts and income into the system (which only takes a few minutes, several times per month) -- and the app will take over from there to figure out which write-off categories your receipts belong in and how much money to write off. It's simply the best application to track receipts for taxes.

As long as you take care of enrolling the receipts, Bonsai Tax will automatically import your credit card and bank statements into its cloud-based online account and can generate on-demand profit and loss reports to keep you aware of your expenses. It will likewise calculate quarterly taxes owed to the IRS every three months, so that you are never receive a late penalty for estimated tax or "off" with those payments, as well as fill out the bulk of the end-of-year tax return.

Let Bonsai Tax Be Your Helper And Guide

Our software helps you run your business smoother while making you more comfortable with and knowledgeable about taxes "work".

It helps that Bonsai Tax comes with top-of-the-line technical support, a 100% accuracy guarantee, and lots of customer praise for being extremely user-friendly. Try the full Bonsai independent contractor application product suite to help automate your business.

Sign up for a free trial of Bonsai Tax software and experience the satisfaction of simple, smooth, and accurate accounting -- and enjoy the money it saves for your business.

Surely, you will find something great to do with those savings: perhaps reinvest them back into your trucking business?

Maria Malyk
Maria is a freelance copywriter and language translator, with a PhD in sociology of culture and cognition and a background in academic, legal and financial writing. A digital nomad, Maria also keeps a travel blog while working on a guidebook for solo travelers on a budget.

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