While it’s always been important for owner operators to have a tax preparer that understands the trucking industry (most don’t), the new tax reform laws passed in December 2017 make it especially critical. You need a tax preparer that understands the trucking industry and is knowledgeable about the new tax laws.
The new tax laws have made significant changes that will impact truck owner-operators. Right now, the laws are confusing because the IRS has not yet released the forms and rules explanations. It’s very difficult to interpret tax rules when all you have to refer to is the legislative bill.
However, there are a couple of law changes that are clearly written in the legislation.
On a personal level, tax reform will make it simpler to fill out and file your tax return. There are very few individual itemized deductions. Unless you have a large mortgage, charitable contributions and high real estate taxes, it is likely that you won’t be able to itemize any deductions.
The good news is that most independent owner operators (including those that lease-purchase) will see a lower tax bill next year. For owner-operators (independent or leased), nothing is changing about per diem. You will still deduct it as part of your Schedule C or corporate return.
Per diem is the percentage of meals and incidental expenses you incur on the days you are working away from home. The current rate is 80 percent of $63 per full day, and 75 percent of this amount for partial days. If you stay in a motel/hotel while working on the road, you can still deduct per diem, but not during the days you are at home. You are not able to deduct per diem for family or friends who may be riding with you.
You can use your e-logs as a record of your per diem expenses, but only if you have the full year of e-logs. Many owner-operators purge their e-logs every 6 months; instead, print out a copy before you delete them.
The big change for owner operators is pass-through taxation. This has been one of the most contentious – and confusing – parts of the tax reform laws. The new laws state that sole proprietors, limited liability companies (LLCs), S corporations, and partnerships will no longer be subject to federal taxation the same way as corporations. Instead, the income earned from these businesses is now “passed-through” to the owner’s personal income tax return.
For tax years after 2017 and before 2026, individuals will be allowed to deduct 20 percent of their qualified business income earned as a sole proprietor, partnership, or S corporation, meaning that owner-operators will receive the first 20 percent of their business profit tax-free.
One of the many benefits of AAOO membership is a discount on tax, accounting and bookkeeping services through the highly reputable and trusted American Truck Business Services (ATBS). Learn more about AAOO’s tax, accounting, and bookkeeping services.