From vehicle weight limits to rest requirements, truck drivers are no strangers to unique rules and regulations – and their tax returns are no exception. Many truck drivers are self-employed, and if handling taxes for a small business wasn’t complicated enough, they also face taxes and rules unique to the trucking industry. When their returns get too complicated, they’ll turn to a tax pro like you for help. To help them stay compliant and minimize their tax liability, here’s what you should know about taxes and deductions for truck drivers.
Truck drivers as employees
Truck drivers who are employees and receive a W2 will have a simpler tax return than drivers who are self-employed. Employees may be able to deduct some work-related expenses that are not reimbursed by their employer on Schedule A, but if they take the standard deduction, they won’t be able to deduct work expenses. Since employees usually don’t own their own vehicle, they won’t face the Heavy Highway Vehicle Use Tax. These drivers’ returns are usually as straightforward as the returns of any other W2 employee.
Self-Employed truck drivers
Many truck drivers are self-employed and own or lease their own trucks, making them subject to self-employment taxes as well as taxes specific to the trucking industry.
Self-employment taxes & estimated tax payments
Just like any other self-employed individual truck drivers will need to pay 15.3% of their taxable income in self-employment taxes. To avoid penalties, they should make estimated tax payments each quarter.
Heavy highway vehicle use tax
The highway use tax applies to vehicles that weigh 55,000 pounds or more, and the maximum tax of up to $550 per vehicle is calculated by the weight of the vehicle. Vans, pick-up trucks, and panel trucks usually don’t count because they do not reach the minimum weight. Other variables include logging or agricultural vehicles and those with minimum road use. To help clients determine if they are liable for the tax, you can use the IRS’s interactive tool, Do I Need to Pay the Heavy Highway Vehicle Use Tax?
To calculate and file the tax, you’ll use Form 2290: Heavy Highway Vehicle Use Tax Return.
The filing season for Form 2290 filers is July 1 through June 30, so truck driver clients might need tax preparation help during your typical “off season.” The deadline for Form 2290 is based on the month your clients first used the vehicle on public highways during the reporting period. The IRS’s chart, When Form 2290 Taxes are Due, can help you determine when or if your client needs to file and pay the tax each month.
Make sure your clients know that drivers must have an EIN (Employer Identification Number) in order to file Form 2290, and it takes about four weeks for the IRS to process their EIN applications.
Maintaining a tax home
In order to claim certain deductions, truck drivers must maintain a “tax home.” Travel expenses such as hotels are only deductible if the driver is away from their tax home. Usually, their tax home will be the city where they conduct most of their business. If they don’t have a main work location, they can use their residence as their tax home.
Drivers who have no main place of business or residence might have trouble establishing a tax home. While they might be tempted to use a relative’s address as their tax home, you should caution them that the IRS may disagree. Drivers who cannot prove a true tax home might benefit from taking the standard deduction.
Deducting business expenses
To help your clients maximize their business-related deductions, you’ll want to know a few rules specific to the trucking industry.
Because semi-trucks count as “non-personal use” vehicles, drivers can deduct the expenses of registering and maintaining their vehicle as well as the vehicle’s depreciation. The standard mileage method is not available to truck drivers, so they must use the actual expense method.
Meals and per diem
Drivers can only deduct their meals if they are traveling away from their tax home, so drivers who work locally won’t be able to deduct these expenses. For drivers who qualify, they can deduct a standard per diem rate or the actual expense. The actual expense method will require them to keep detailed record of their receipts, while the per diem rate will let them deduct a set amount for each day of travel. Current per diem rates for truck drivers are $69 per day within the continental U.S. and $74 per day outside of the continental U.S.
While most businesses can deduct 50% of per diem and meal costs, truck drivers can usually deduct 80%. However, thanks to provisions in recent bills, they can deduct 100% for tax years 2021 and 2022.
Truck drivers can deduct a host of other business expenses including:
- Association dues
- Fees for licensing and continuing education
- Tools and other equipment
- Insurance costs
- Dispatch fees
- Specailized clothing worn only for work such as safety gear
- Medical expenses required for work (Truck drivers are usually required to get a yearly medical exam)
- Cell phones and phone plans (If the devices are also used for personal use, they may only deduct the portion that is used for work)
- Office expenses
Choosing a business structure
Part of serving small business clients is helping them choose the most tax-advantageous business structure. For many truck drivers, filing as a sole proprietor in an LLC makes the most sense. For drivers who consistently earn over $75,000, filing as an S-corp and paying themselves a reasonable salary may be the better option since it reduces the amount of income that is subject to the self-employment tax.
Have more questions about your truck driver clients’ tax returns? You can refer to the IRS’s Trucking Tax Center for more info.
This article was last updated on 07/20/2022.