Tax filing season is coming up fast. As an owner-operator, it’s time to get ready for annual business taxes, and you want to make sure you limit your tax burden as much as possible. We have five tips to help you maximize your deductions and credits while being prepared for the unexpected. Here’s some tips from our experts at Saint John Capital about what you need to do to lessen stress this 2025 filing season.
Consider All Possible Tax Deductions and Tax Credits
Trucking company owner-operators have a number of possible tax deductions and tax credits available. Many of them are business expenses discussed below, but others fall under the tax credits category.
One of the biggest involves the purchase of trucks that run on electricity. If you purchased a truck, you may qualify for the Commercial Clean Vehicle Credit of up to $40,000.
Did you start a new pension plan for your company? You might qualify for the Small Employer Pension Plan Startup tax credit. There are also tax credits for things like paid family and medical leave, small employer health insurance premiums, and improvements you made to address a disability.
Don’t Miss a Quarterly Estimated Taxes Payment
Have you been making quarterly estimated tax payments? Business owners need to make them each quarter, typically on April 15, June 15, September 15, and January 15. Holidays and weekends may push those dates back by a couple of days. It’s also possible to pay everything at once on the first tax payment date, which is April 15th.
Do you expect to owe more than $1,000 in taxes? Do you expect your withholding and refundable tax credits to be less than 90% of the tax shown on your return or 100% of the past year’s return? If you meet those criteria, estimated tax payments are required. Failing to pay them can lead to underpayment tax penalties, which can be costly at around 7 to 8%, depending on the quarter.
Make sure you pay estimated taxes and keep clear records. If you pay online, save the receipt in a secure location. If you mail in a tax payment, send it certified with tracking so that you can prove the payment went to the IRS. Keep a copy of the cleared check, too.
Keep Paperwork Organized and in a Safe Place
Everything you do needs to have a paper trail. Make sure you keep paperwork in a fireproof safe or lockbox. Don’t just store your information on your computer. Have printouts as a backup. Ideally, consider having files stored in a secure file in the cloud, on an external hard drive that you store somewhere safe, and paper copies, too.
When a client pays you, you’ll get a 1099-NEC. Use those forms and your own invoices and paperwork to verify your business income. If you haven’t gotten one from a client, ask where it is. They must submit one as long as they paid you more than $600.
If you ever get audited, you need to prove every deduction you claim. You also have to prove your gross income or revenues. You may need to provide a copy of your business license, government paperwork, CDL, etc. to show you are a legitimate trucking business.
Track Your Business Expenses
As a business owner, you need to carefully track business expenses. Keep track of everything you spend on your business, including new office equipment, office supplies, power, internet, and HVAC. Your trucking company’s heating and cooling costs, truck expenses, fuel, licensing, permits, and miles traveled are all important. Here’s a list of common trucking company tax deductions.
- Association or union dues
- Bookkeeping fees
- Business and truck insurance
- CDL and any permits or add-ons, such as hazmat
- DOT medical exams
- Freight broker fees
- Fuel
- Internet plans and phone service, providing the computer and phone are used only for your business.
- Marketing expenses
- Office supplies
- Subscriptions to things like loading finding apps or route planning software
- Tools
- Training and certification
- Travel expenses
- Truck maintenance
- Truck payment, interest on the loan if you financed the truck and/or trailer
- Uncollected debt
- Vehicle weighing fees and tolls on roads
- Wages and benefits for other employees, such as a bookkeeper or office manager
- Work-only clothing or safety gear, such as a reflective vest
Ideally, you want staff to keep these expenses updated every day. If that’s not the case, it’s time to upgrade your current system. Slips of paper are fine, but it’s a lot more work when it comes to doing your taxes.
The other reason to keep clear records is that you also want to track depreciation. You can deduct depreciation on your taxes.
For example, you purchased an iPad for your truck to use for electronic bills of lading, banking, etc. The iPad is only used in your truck and never used outside of it. The average lifespan of an iPad is five years. You spent $2,000 on that iPad with the most memory, so every year, it depreciates by $400. ($2,000 divided by five years). You could claim that.
Understand Per Diem Deductions
When you’re on the road, you need to eat and sleep, and that often means stopping at a restaurant, truck stop, hotel, or store to get something and park your truck while you sleep. The IRS allows for those “Per Diem” expenses. As of October 1, 2024, the Per Diem rate is $80 per day. However, it’s important to realize you can only claim 80% of that amount in your deduction. This means you can claim up to $64 per day.
To claim a Per Diem rate, you must be away from your home for the entire day and sleeping elsewhere. A nap doesn’t qualify. An owner-operator has to work away from their home area and needs meals and sleeping accommodations while away from home.
On your departure and return days, you only receive partial day payments of $60. Again, you can deduct up to 80% of that $60, which is $48.
These rates change if you cross the border. If your job requires you to transport merchandise into Mexico or Canada, the Per Diem rate changes. It becomes $86 for a full day or $64.50 for a partial day. The same 80% limit applies, so you can deduct $68.80 for a full day or $51.60 for a partial day.
It’s important to note that because the rate changed in October, you must calculate your Per Diem using the old rate of $69 (U.S.) or $68 (Canada). That can be tricky, so it’s advised that you work with a specialist in business taxes to ensure you’re getting the maximum Per Diem deduction.
Freight factoring offers additional tax benefits. The factoring fees you pay are a business expense. You can offset your earnings by business expenses to reduce your taxable income. You gain immediate payments and tax deductions at the same time. Contact Saint John Capital to learn more about our factoring fees and arrangements.
