06 Feb Tax Reform and Per Diems for Truck Drivers Explained
We previously talked about the already famous Tax Cuts and Jobs Act of 2017, explaining it in straightforward terms how it affects the regular citizen like you. However, as is usually the case with such laws, many are still baffled as to how it all works and how it affects them.
Most importantly, we haven’t discussed how these tax reforms affect truck drivers. You are probably aware; we specialize in helping truckers and trucking companies.
Trump’s Tax Reform Effect on Truckers
Trump’s tax reforms are significant and all-encompassing. But, for those in some specific industries, it doesn’t matter how it affects people who have nothing to do with them.
When it comes to the trucking industry, the law has made some critical changes in several cases.
Most notably, the new law has ended the daily $63 per diem deduction given to all truckers for on-the-road meal expenses. Essentially, this means that truckers whose employers don’t pay them per diem allowances can no longer get a tax deduction for their meals while on the road.
If the employer pays a separate per diem allowance and then gets a tax deduction for it on their own, then this change doesn’t affect the driver or the owner.
Additionally, this means that such drivers get further benefits from the new law. By this, we expect the fact that the new bill doubled the standard deduction for taxpayers. That essentially means that all drivers get bigger deductions with this bill, but those who weren’t getting their per diem deductions, get both a tax-free per diem along with the previously mentioned doubled deduction.
Changes Affecting Owner Operators
When it comes to self-employed people and companies, the new law doesn’t make any notable differences. You are still getting the standard deductions you were getting in the past. That means that you can again take a per diem for your meals and incidentals, as these count as business expenses for people who are in business for themselves.
Additionally, partnerships, sole proprietorships, and small business (S corporations) can now get a 20% deduction for pass-through businesses income. In translation, this can mean up to $2,000 in annual savings for a large number of owner-operators, as 95% of US businesses are pass-throughs.
As for C corporations, their tax rates are now reduced from the standard 35% to 21%. Unfortunately, C corporations are still subject to double-taxation as they were before.
The Bottom Line
Regrettably, the new law is as complicated as it was before, and it can mean various things for different trucking companies, or truckers.
There is no single solution on how to make the best of these changes, but thankfully, in most cases, the revisions are either good or keep things more or less the same.
If you still want to know more about the modifications, or get some professional assistance with your taxes, feel free to contact us and we’ll make sure to help you as best as we can.