Owner-operators are the people who own and operate a trucking business. Since they are not categorized as employed individuals, the process of filing taxes is immensely different, along with the deductibles they can claim during tax season.
If you are an owner-operator truck driver, the responsibility of paying taxes will ultimately lie on your own shoulders. Therefore, it is important to know the different types of taxes for your business and other relevant deductions for a smoother tax filing operation.
What you need to know as an owner operator truck driver
Are you just starting your own trucking business?
If this is the case, you should know that tax payments will not be taken from your paychecks.
Instead, you will be the one to pay your dues every tax season. This would also mean that if you want to lessen the burden, you should be thorough with your accounting to know the tax deductions you are eligible to claim for your business.
Being a self-employed driver can definitely give you more freedom than being a company driver. However, if you are an owner-operator, make sure that you pay your quarterly taxes as required without lapses. After all, each one of us would surely want to avoid any trouble or penalties with the Internal Revenue Service (IRS).
Common Tax Deductions for Owner-Operator Drivers
Preparing for your tax payments requires patience and time. To prevent last-minute changes, knowing your tax duties and setting aside time to do it regularly will be worth it in the long run.
Here are the following types of taxes you should know of:
- Self-employment taxes — Owner-operators are considered to be self-employed drivers. They must pay their Medicare and Social Security taxes on their own. According to the IRS, the SE Tax Rate is 15.3%.
- State and Federal income tax — Aside from your self-employment taxes, you will also have to pay your Federal and State Income taxes. However, the amount you have to pay will depend on your paychecks. It is highly recommended to set aside at least 25% to 28% of your weekly net profits as it will also be up to you to determine how much taxes you should pay every year.
Tax deductions for Owner-Operators
As an owner-operator of a trucking company, here are the types of deductibles you can claim:
Meals — To have your meal expenses deducted, the first thing you need to do is determine your tax home. Your tax home is the place where your business ultimately operates, however, it can also be your home address. Why is your tax home important? This will let you determine if you are driving far away from home, which of course, would mean that reimbursement for your food and drinks is necessary.
Insurance — This includes the insurance you are getting to cover for the other expenses aside from the usual auto insurance. For example, you may need to get your own health insurance or coverage for extra cargo.
Vehicle expenses — This includes the maintenance and repairs you need for the vehicles you officially use for your business, such as registration, fuel costs, depreciation, and other related expenses.
Work tools and equipment — This includes all the necessary tools and equipment you need for your trucking company. For example, chains, maps, radio, cell phones, safety gear, and more.
Medical examinations — Depending on certain circumstances, some medical expenses can be deducted from your tax payments. For example, medications and doctor’s fees, and physical exams are usually deductible.
Personal supplies — This includes personal supplies that are still considered a business expense. For example, uniforms, eyeglasses, and gloves qualify for a deduction.
Office expenses — Operating a trucking business does not mean that all deductibles should be vehicle-related. Hence, the expenses necessary for office operations such as office supplies, software fees, computers, calculators, and even pens can be deducted from your payments.
Travel expenses and lodging — Do you need to travel a long way from home during your business ventures? If you can prove that it is related to your work, it is absolutely possible to include your travel expenses and lodging in your deductibles.
Other work and business expenses — Aside from the fees mentioned earlier, some other work and business expenses that could be deductibles are accounting services, interests from business-related loans, internet, and more.
A tip from owner-operators with years of experience
Although it can be easy to forget, you should always keep your receipts recorded. It does not matter if it is just a few dollars’ worth.
Remember: Every penny could quickly add up. Do not throw your meal and coffee receipts away, as they can definitely add up to a significant amount over time.
If you are a new owner-operator (or maybe you are disorganized), label your receipts every week. This will be much easier than waiting for the tax season to come.
Make your everyday accounting easier to manage
As an owner-operator driver, it is normal to feel confused about the taxes you need to file. Therefore, to make the whole ordeal less overwhelming, making use of various types of technology and applications for your day-to-day job can make a huge difference. TripLog is an automatic mileage tracker app you will not regret investing in.
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