It is tax season – now is the time to be thinking about filing your taxes. As an owner-operator, you are considered self-employed or what is known as an independent contractor. You are responsible for paying taxes instead of them being taken out of your check. So, as an independent contractor, you are eligible for tax deductions. Knowing which deductions, you are eligible for can help lower your tax responsibility.
Continue reading below to find answers to the most common tax questions for owner-operators.
Tax Deduction Questions
Question: What tax forms does an owner-operator need to file?
Answer: As an independent contractor, your carrier will give you a 1099 form that has all your earnings from that trucking company. If you haul for multiple carriers, you will receive a 1099 form from each carrier. Once you receive this form, you will then file Form 1040. Suppose you own more than one tractor-trailer or employ other drivers. In that case, you are responsible for sending each employee a W-2 form.
Question: How much should I set aside for my business taxes?
Answer: Typically, a tax professional advises that independent contractors set aside 25% - 30% of their quarterly net earnings.
Questions: What would happen if I did not pay my quarterly taxes?
Answer: If you fail to pay your quarterly taxes, you may be subject to tax liabilities, penalties, and interest charges from the IRS.
Question: Do owner-operators receive tax returns?
Answer: In most cases, independent contractors do not receive a tax return. If you do get a tax return, this could mean that you paid more in on your quarterly taxes throughout the year.
Per Diem Tax Questions
Question: How does Per Diem tax deduction work?
Answer: The Per Diem tax deduction is for meals and other related expenses on the days that you are away from home. As of October 1, 2021, the current rate is 100% of $69 per full day, and ¾ this amount for half days. Half days are when you leave home but return the same day, and full days are when you must stop driving due to hours of service. If you decide to take a personal day while on the road – this will not count as a Per Diem Day. If you must rent a motel while hauling a load, this expense is deductible, but not during home time.
Question: Can an e-log record be used to count days for Per Diem?
Answer: If you have the full year of e-log records, you can use this. You may contact your carrier every 3 – 4 months for a copy of your e-logs. Do not wait until the end of the year to ask for these records because some carriers delete e-logs every six months.
Tax Deduction Questions
Question: Is fuel tax deductible?
Answer: Yes, a part of your fuel is tax-deductible for owner-operators.
Question: Can I claim my home office as a deduction?
Answer: Some owner-operators can claim their home office as a tax deduction. However, you must meet the following requirements:
Your home office must be used only for your business and regularly, and;
Your home office must be the principal place of your business
Question: Is a gym membership tax-deductible?
Answer: Gym memberships are only tax-deductible if a doctor has prescribed to help treat a certain medical condition. Also, the membership must have been created after the diagnosis.
Question: Are medical expenses deductible?
Answer: If your medical expense is over 7.5% of your Adjusted Gross Income (AGI), you can deduct any amount over 7.5%.
Question: Is dog expenses tax deductible?
Answer: If your dog is acting as security for your truck, this is considered a guard dog, and the expenses for your dog, including food and vet bills, can be tax-deductible.
As an owner-operator, it is important to remember to save all receipts and record any miles you drive. Along with miles, you can deduct toll expenses, travel expenses, parking fees, and meals while on the road. Every expense you deduct will lower your tax responsibility. The more you can deduct, the less you owe to the IRS. Contacting a tax professional can help you find all the tax deductions you are eligible for. Don’t forget to file your taxes by April 18th, 2022.