Owner-Operator Truckers: Essential Tax Updates and Filing Tips for 2024

As an owner-operator truck driver, you have a lot on your plate – from managing your business to being on the road for long hours.

However, one aspect you cannot ignore is taxes, which could land you in trouble with the IRS. Understanding and properly navigating the tax system can save you thousands of dollars in deductions and credits.

Therefore, you must understand your tax obligations if you run your own trucking company. The key to accurate tax deductions and payments is impeccable recordkeeping practices.

This will make it easier for you to make your quarterly and annual tax payments. This blog post covers the various types of taxes and potential deductions available.

Navigating through the tax process can be overwhelming. But fear not! This guide will break down everything you need to know about filing taxes as a trucker.

What is Your Estimated Tax Payment?

Estimated tax payments are quarterly payments made towards income and self-employment taxes throughout the year instead of one lump sum at tax time.

As an owner-operator trucker, you are considered self-employed by the IRS; therefore, making these estimated payments is essential to avoid penalties or interest charges.

For instance, every owner/operator whose estimated tax payment exceeds $1000 after all the deductions and tax credits. They are expected to make quarterly payments for self-employment and income tax. There are various taxes every owner/operator is expected to pay. They include:

Self-Employment Tax

Self-employment tax consists of Social Security and Medicare contributions paid by self-employed individuals. As a trucking company owner/operator, you must pay for both. Social Security accounts for 12.4% and 2.9% for Medicare).

Personal Income Tax

Like any other employed or self-employed person, owner-operator truckers must pay personal income taxes based on their taxable income.

This includes federal and state income taxes, varying depending on where you live and operate your business. Consider checking out an updated trucking tax guide online from a reliable source.

Heavy Highway Vehicle Use Tax (HVUT)

The Heavy Highway Vehicle Use Tax is an annual fee paid by owners of heavy vehicles weighing over 55,000 pounds that use public highways in the United States. As an owner-operator trucker with a vehicle of this weight, you are responsible for paying this tax each year between June and July.

You can check IRS Form 2290 for further details and filling instructions. Luckily, if you are leasing your truck, the leasing company is responsible for this HVUT.

State Income Tax

Many states have income tax systems in addition to the federal income tax. Operating in multiple states can be overwhelming, so it’s crucial to understand each state’s specific laws regarding income taxes. Check the IRS website for requirements on filing state taxes.

International Fuel Tax Association (IFTA) Payments

IFTA payments are quarterly fuel taxes paid by commercial motor carriers operating within multiple states. The best part is that you don’t need to do any calculations as long as you have your IFTA license.

The local IFTA base in your state will send quarterly tax returns calculated based on the fuel tax rates. These payments ensure that fuel taxes are distributed fairly between jurisdictions based on miles driven in each location.

Other Tax Payments

In addition to income taxes mentioned earlier in this guide, other potential tax payments that owner-operator truckers should be aware of include:

Employee Tax: If you have employees working under your company name, it’s essential to understand and adequately withhold employment taxes such as Social Security, Medicare, and federal income tax.

Excise Tax: Excise taxes are applied to specific goods or services, including fuel used in commercial vehicles. As an owner-operator trucker, you may be responsible for paying these taxes on certain items related to your business.

Tax-Saving Tips for Owner-Operator Truck Drivers

Now that we’ve covered the various types of taxes applicable to owner-operator truckers, let’s discuss some tips on how to save money on your taxes.

Claiming Tax Deductions and Tax Credits

Tax deductions reduce taxable income, while tax credits directly decrease the tax owed. Every owner-operator trucker must understand both and take advantage of possible deductions or credits.

What are Tax Deductions?

Tax deductions refer to expenses that can be subtracted from your gross income before calculating how much you owe in taxes. Some everyday deductible expenses for owner-operator truckers include:

• Office Expenses
• Fuel Expenses
• General expenses ( alarm clock, bedding, cab curtains, Tupperware, coffee maker)
• Expenses (cell phone. Laptops, GPS),
• Cleaning supplies
• Protective clothing expenses
• Transportation expenses
• Tools (tape, flashlight, straps, locks, chains, and tire iron)
• Office Supplies
• Retirement Plans
• Insurance Premiums
• License and Registration Fees
• Leasing Costs
• Trucking Association Membership Fees
• Compliance Fees

It’s essential to keep detailed records, receipts, and invoices for all these expenses throughout the year to claim them accurately when filing your taxes.

What is a Tax Credit?

Unlike deductions, which lower your taxable income, tax credits directly reduce the tax owed. For example, if you owe $5,000 in taxes but have a credit worth $1,500, you only need to pay $3,500 in taxes. Some common tax credits for owner-operator truckers include:

• Fuel tax credit
• Vehicle acquisition tax credit
• General business credit

Ensure You Are Free of Audit Risk

Keeping detailed records is one way to stay compliant with your taxes and reduce the risk of an audit. This includes tracking all your business expenses, maintaining accurate mileage logs, and adequately filing your tax returns on time.

With the necessary proof, the IRS will approve your tax deduction and tax credit, which may warrant a random audit or attract penalties.

Note: Properly store all your records for a minimum of three years. It would be best to store them electronically to avoid misplacement and always have a backup.

Make Use of Per Diem

The IRS determines per diem, which refers to daily allowances for meals and incidental expenses while you are away from your ‘tax home’ for business purposes.

As an owner-operator trucker, you are eligible for per diem deductions based on the days you spend away from home for business purposes.

Make Use of Depreciation Laws

Depreciation allows business owners to deduct the cost of a tangible asset over its useful life instead of deducting the entire cost in one year.

For instance, if you purchase a new truck for $100,000 with a useful life expectancy of five years, you can claim a depreciation deduction of $20,000 each year.

Health Insurance Subsidies

As an owner-operator, you may be eligible for health insurance subsidies through the Affordable Care Act’s Marketplace. These subsidies can help lower healthcare costs and save money on taxes.

Those who qualify must have obtained their health insurance via the Federal marketplace and plans to continue using it.

Note: Your tax credit will be based on the income you filled out during registration.

Hire Tax Professionals

The only way to avoid the stress of filing taxes is to outsource the service. Many accounting firms help small business owners manage their business accounting needs, allowing them to focus on operations.

Final Thoughts

Managing taxes as an owner-operator trucker can be challenging, but you can hack it with the right resources and impeccable recordkeeping.

Ensure you are organized by keeping records of all your expenses and saving receipts and invoices. These will provide proof when you claim deductions and tax credits and help you evade the IRS’s keen eye.

Consult a professional accountant or tax advisor if you are stuck or want to subcontract your accounting needs.