Tax Tips for Owner-Operators: Tax Preparation for Truck Drivers

Taxes look different when you’re an owner-operator or independent contractor. When you drive for a trucking company, taxes are taken out of your paycheck automatically. If you run your own trucking business, you must pay taxes yourself. Lease operators can deduct many work-related expenses from their taxes, which makes planning and tracking day-to-day expenses an essential part of each haul. 

Are you prepared to file your taxes this year? Know what to expect and save yourself some stress with these tax preparation tips for truck drivers. 

Stay on Top of Your Quarterly Taxes

As an owner-operator, there are many things you need to keep track of—loads, truck leases and maintenance and renewing your Class A CDL. On top of all that, you’ll need to pay your taxes! 

Company drivers have taxes automatically deducted from their paychecks. Self-employed drivers do not. If you’re an owner-operator, you’re required to pay taxes every quarter. The self-employment tax rate is 15.3%, split into 12.4% for Social Security and 2.9% for Medicare. The 1040-ES Form provided by the IRS is used to figure estimated taxes for individuals, sole proprietors and partners. Corporations use Form 1120-W.

How much in taxes do owner-operators pay? The answer depends on how much you make each year. Generally, owner-operators should set aside 25% to 30% of their weekly net income to pay quarterly taxes. That way, you have money saved and set aside for taxes, and you can avoid surprise tax bills down the road.

Failing to pay your taxes each quarter results in penalties. The IRS will charge you underpayment fees and interest on unpaid taxes.  

Keep Records of All Expenses

Tax preparation for truck drivers revolves around tracking expenses. The best way to avoid scrambling around tax season is to become an expert recordkeeper. Owner-operators can write off many of their work-related expenses, including food, fuel and lodging, if they can show proof of purchase. 

It can be hard to track every expense on the road. Sometimes, it’s a habit to say “no receipt” for small items like a $5 snack. Over time, little purchases can add up. You need the receipts to write them off. 

Collect a receipt every time you make a purchase. Then, sort and label your receipts by food, fuel and maintenance at the end of each haul. Store your organized receipts in a file cabinet or digitize them when you return home. 

Records of your expenses support the deductions you claim on your tax return. You’ll pass the receipts onto your tax professional when you do your taxes. If you are audited, the IRS will ask you for these receipts. 

Know What Qualifies as a Truck Driver Tax Deduction

Owner-operators can write off certain business expenses. The per diem deduction allows you to write off “ordinary and necessary” purchases while traveling. According to IRS publication 463, owner-operator truck drivers can claim tax deductions each day they are away from home for meals and other incidental expenses. On the days they depart and arrive, they can only claim a partial day’s allowance instead of a full one. 

Per Diem Tax Rates for Owner-Operators 

As of October 1, 2021, the per diem tax deduction rate is $69 per full day and $51.75 per partial day. Keep in mind that the per diem rate for January 1, 2021, to September 30, 2021, was $66 per day. 

• January – September 2021: $66 per day
• October – December 2021: $69 per day 

Previously, the IRS gave 80% per diem deductions. Temporarily, for 2021 and 2022, the IRS allows 100% per diem deductions. The Federal Consolidated Appropriations Act of 2021 includes 100% deductions for all meals. 

One way to track per diem expenses is to create a calendar. Mark the days you are on the road and label the days you depart and return. You can give your accountant the total number of days and let them do the rest!

Common Tax Deductions for Owner-Operator Truck Drivers

What else can truck drivers write off? 

• Truck depreciation and interest payments
• Truck maintenance 
• Fuel 
• Trucking association fees
• Cell phones, computers and internet expenses
• Tools and equipment (snow chains, tire iron, etc.)
• Business insurance, taxes and licensing costs
• Home office 

Self-employed truck driver tax deductions include writing off supplies and job-related clothing items like steel-toed boots and work gloves. You can also receive credit for new and necessary truck parts and Auxiliary Power Units. You may be able to deduct expenses for your dog if the animal is considered a security measure for your truck.

Though your main place of business is your truck, it is possible to qualify for a home office deduction. You are eligible for this deduction if your home office is used regularly and exclusively for business and is your principal place of business. 

Over-the-road truckers spend most of their time outside of their homes. However, you may be able to claim this deduction if you have a home office for planning routes, scheduling hauls, taking business calls and organizing receipts. Talk to a tax professional to find out what you can deduct. 

Explore Potential Tax Credits 

Before you file, you should determine if you are eligible for tax credits. The COVID-19 pandemic made certain credits available during the year 2021. Be sure to include information about stimulus checks, donations and more when you prepare items for your tax return. 

• The American Rescue Plan Act gave individuals and their family members a $1,400 stimulus check. If you haven’t received a check yet or you received a reduced amount, you can claim the amount as a credit.
• Form 7072 gives tax credits to self-employed individuals who missed work because of COVID. This credit was in effect until March 31, 2021. You could claim up to ten days if you missed work because of COVID between January 2021 and March 2021. Those who missed work because they were caring for someone else with COVID at that time can claim up to 50 days.
• Charitable donations can also be claimed on your taxes. If you gave to any charities or nonprofits, be sure to include those donations when filing. A tax professional will need to see the records or receipts for those donations.  

Work With a Tax Professional

Taxes can be confusing and time-consuming, especially if this is your first time filing as an owner-operator. Don’t miss a deduction that could save you money or make a mistake that triggers an IRS audit. It’s best to hire a professional to prepare your tax return unless you feel comfortable doing it yourself. 

Working with a trusted accountant or tax preparer helps ensure your tax return is completed without errors. As an owner-operator, you need to pay quarterly taxes and keep organized records of your expenses throughout the year. When tax time comes, you’ll have everything you need at the ready. 

This article is not professional financial or tax advice. We recommend you see an accountant or tax professional to answer your questions and prepare your tax return. 

Become an Owner-Operator Today

Are you interested in becoming an owner-operator? Does running a business sound like the next step for you?

Start your owner-operator journey. Explore Prime’s Success Leasing program for more information on available truck leasing options. 

Have a fleet already? Join Prime’s Power Fleet to access our freight network while maintaining your own brand. 

Get the equipment you need to complete your fleet. Purchase used Prime-owned trucks and trailers through Pedigree Truck and Trailer Sales. 

We support independent contractors and help you grow your business. If you’re ready to join Prime as a company driver or independent contractor, apply today or contact our Recruiting Department at 866-290-1568 for more information.