Tax Saving Tips for Cargo Van & Truck Drivers
CARRIER, DEDUCTIBLE, DELIVERY, LOGISTICS, SHIPPING, SOKO EXPRESS, TAX, SAVING, TRANSPORTATION
Read tips and tricks on how to make it easier for yourself and your business. Save your money!
Every self-operating business can be difficult and money and time-consuming. 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. 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, only if they can show proof of purchase.
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 or yearly taxes. That way, you have money saved and set aside for taxes, and you can avoid surprise tax bills down the road.
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 on to your tax professional when you do your taxes. This job can get pretty expensive with the bills, unexpected expenses, and of course taxes at the end of the year, so make sure you spend your money wisely. Expenses are inevitable, but make sure you use the benefits they come with.
P.S. 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.
Types Of Required Owner-Operator Taxes
Self-employment tax. When you work for a company, that company pays an employer tax, while you pay income tax. When you’re self-employed, you’re both employer and employee, which means you must cover both sides of that tax equation. Self-employment tax breaks down into a social security tax of 12.4% in 2021 and the Medicare tax of 2.9% for that same year, for a total of 15.3%. (See the IRS’ page on Self-Employment Tax for updated tax rates.)
Personal income tax. Your personal income tax rate is what makes universal advice about taxes untrustworthy. It changes based on your income and your filing status. For example, drivers annually earn after expenses between $9,950 and $40,525 worth of income are typically paying 12%. Rates go up as the income goes up but its always a safe bet to set aside 30%. Then after you do your taxes whatever is left in that tax account is yours to keep. With all that variety, you pretty much have to make your own estimates—or, better yet, bring in a tax professional. There’s no one-size-fits-all recommendation on federal tax rates. In addition to these federal taxes collected by the IRS, self-employed owner-operators are responsible for a range of state and local taxes. These include:
State income tax. Most states collect income tax, and many of them mirror the IRS requirement for estimated quarterly taxes among the self-employed. However, state taxes are a real patchwork; your best bet on planning for state taxes is to check your state’s taxing authority website. Find your state on the IRS list of state revenue sites for details on local filing requirements.
International Fuel Tax Association (IFTA) payments. The simplest way to handle fuel taxes is through IFTA, a multi-state-associated tax authority. Once you get your IFTA license, your local IFTA base jurisdiction will send quarterly tax returns calculated with the relevant fuel tax rates; you must pay these quarterly, as well.
We hope that you find this information useful in fulfilling your tax-paying duty. If you need any additional information and/or assistance, do contact a professional for further help as they can give you a far better insight into everything mentioned above. Good luck!
Soko Express
401 East Louther Street, Carlisle, Pennsylvania 17013, United States
(833) 367-7656