An owner-operator is a truck driver who owns their own business. For owner-operators, building a budget is critically important. You need to make sure that your business accounting is done properly so that you are in the best position to take advantage of all available tax deductions.
This raises an important question: What can owner-operators write off? The short answer is that they can deduct a wide range of business expenses. In this article, our trucking accountants provide a more comprehensive overview of the key things to know about owner operator tax deductions.
What is a Tax Deduction?
Businesses have to pay taxes. It is a reality of life. How exactly a business is taxed depends on the specific structure of the company. Most owner-operators are self-employed. In effect, they are operating a sole proprietorship. A sole proprietorship is a so-called “pass-through” tax entity—meaning, for the purposes of taxation, the earnings and expenses of the business are “passed” directly to the individual.
Sole proprietors (including owner-operators) must pay taxes on their profits. However, they are allowed to take certain deductions when calculating how much they owe. A tax deduction is sometimes also referred to colloquially as a “tax write-off.’ The two terms mean the same thing. As explained by the Internal Revenue Service (IRS), business expenses are “usually deductible if the business operates to make a profit.” In other words, you can deduct most normal business expenses when calculating your taxes as an owner-operator in the trucking industry.
An Overview of Tax Write-Offs for Owner Operator Truck Drivers
As noted previously, most standard business/operating expenses are deductible for self-employed individuals, including owner operator truck drivers. At Williams Accounting & Consulting, we want to make sure that you have a more in-depth understanding of the available tax write-offs as an independent truck driver. Some notable examples of common owner operator truck driver tax deductions include:
- Operating Expenses: As you undoubtedly already know well, it costs a lot of money to operate a truck. Under federal tax regulations, owner-operators can deduct (write off) their vehicle-related operating expenses. Among other things, you can deduct the cost of fuel, highway user fees, tolls, taxes, and truck maintenance. It is crucial that you carefully document and record all of these expenses. When it comes time to calculate your taxes, you are going to want to be certain that you have written off all of your truck-related operating costs. You should not be taxed on those amounts.
- General Business Expenses: Not only does it cost money to drive and maintain a truck, but it also costs money to own and operate a business. You can also take deductions for your general business expenses. These expenses are a little bit more complicated for owner-operators, so it is essential that you are certain that you are in full compliance with IRS rules and regulations. Some business expenses that you can write off as an owner-operator truck driver include computers, business software, internet service, truck association fees, marketing & advertising expenses, business accounting services, and tax preparation.
- Payments to Subcontractors: Do you ever pay anyone else to drive your truck or otherwise provide services to your business? Unless you have employees, you are generally working with a subcontractor. It is not uncommon for owner-operator truck drivers to subcontract their vehicle, either regularly or sporadically. If you do hire a subcontractor, you have the right to take a deduction for those costs. Make sure you issue the proper tax forms. If you paid a subcontractor more than $600 in a year, then it should be reported to the IRS and you should issue them a Form 1099-MISC.
- Truck Depreciation: Do you own your truck? If so, it is a depreciating asset. You should take the proper tax deduction to account for this expense. As defined by Investopedia, depreciation is an “accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy.” In layman’s terms that means that your truck becomes less valuable over time. As a business owner (owner-operator), you have the right to take a tax write-off for the depreciation of your vehicle. By doing so, you can save a good amount of money on your taxes each year. A business accountant with experience handling tax preparation for owner-operator truck drivers will make sure that you get the most out of this deduction.
- Meals & Lodging: If you are a long-haul truck driver, there are personal expenses that must be incurred on your trips. After all, you are going to have to eat and you may need somewhere to stay. Under IRS rules, you can generally write off work-related meals and work-related lodging expenses. For example, imagine that you are contracted to haul freight from Atlanta, Georgia down to Jacksonville, Florida. It is a 10 hour round trip. The IRS allows transportation industry professionals—including owner-operators—to deduct the actual cost of their meals (save your receipts) or to take the standard meal allowance.
How the Trucking Accountants at Williams Accounting & Consulting Can Help
With a specialization in accounting and tax preparation, our business consultants are committed to providing the highest quality services to small and mid-sized companies. We frequently work with clients in the trucking industry, including owner-operators. Our team offers a wide array of accounting packages that can be customized to meet the unique needs of your business. Among other things, we can assist you and your business with:
- Financial statements;
- Monthly accounting;
- Review of transactions;
- Reconciliation of accounts;
- Business tax preparation;
- Identification of tax deductions; and
- Much more.
Get Help From a Business Accountant for Owner Operators in the Trucking Industry
At Williams Accounting & Consulting, we provide a full range of business accounting and consulting services—with a specialization in tax matters. If you have any questions about the expenses that owner-operators can write off, we are more than happy to help. Contact us today for a confidential initial consultation. With office locations in Atlanta and New Orleans, we provide business consulting services to owner-operators throughout the Southeastern United States.