Tax time is almost here, which means many truckers will be spending their evenings researching potential tax deductions instead of happy hour. It’s not uncommon for those in the transportation industry to overlook potential tax write-offs during their first few years on the road.
After all, keeping track of expenses related to your job can feel like an afterthought in the face of other pressing financial concerns. When you’re new to the industry, it can also be challenging to know where to begin when it comes to filing your taxes.
But with the right knowledge, anyone in this field can easily avoid costly mistakes and get back on track with their taxes before time.
That being said, there are several common mistakes truckers make when filing taxes. To help prevent those errors and get ready for Tax Day, we've outlined some helpful tips below:
The Most Common Tax Mistakes Truckers Make
Here we compiled some crucial factors you should consider while filing your taxes as a trucker.
- Know the difference between business and tax-deductible expenses
- Track your mileage accurately
- Don’t forget to write off maintenance costs
- Your truck is a business, so deduct its costs too
- Prepare for an IRS audit
Know The Difference Between Business And Tax-Deductible Expenses
When truckers file for deductions, they either deduct expenses related to their job or business. For example, if you’re taking a class to improve your skills and increase your earnings, that’s a job-related expense.
On the other hand, if you’re buying a new computer for yourself and your team, that’s a business expense. Business expenses are those that are essential to running your trucking business.
You can only deduct those if you run your company as a sole proprietorship, S corporation, or LLC. Business expenses include:
- Taxes on your business property, like your truck
- Insurance premiums
- Payments to a mechanic to install equipment on your truck
- Cost of tools that you use in your jobs, such as a laptop or cell phone
- The price of replacing your cell phone due to damage on the job.
Track Your Mileage Accurately
When you’re a trucker, keeping track of your mileage is essential. It’s used to calculate the amount of money you’re owed for your job and is also a standard tax deduction. With that in mind, it’s essential that you track your mileage correctly. Otherwise, you’re not getting the most out of your deduction.
Many truckers make the mistake of keeping track of their mileage using their odometer. While this is a simple process, it’s not accurate. You’ll need to either use a tracking device or manually write down how many miles you’ve driven. Next, add the total miles and write them down on your W-2. This information will help you calculate your potential mileage deduction.
Don’t Forget To Write Off Maintenance Costs
Many truckers don’t think to write off maintenance costs related to their truck. However, this is another common tax deduction available to those on the road. Maintenance costs are those that relate to regular repairs on your vehicle. These differ from repairs due to wear and tear or damage from a collision if you’re keeping track of your mileage.
However, there are also two different methods for claiming these deductions.
- The first way is to deduct the actual cost of repairs or maintenance.
- The second method uses the standard rate.
Periodic Maintenance
Rather than deducting repairs, you can choose to deduct the standard rate for periodic maintenance. This standard rate is $5 per 100 miles driven. This means you can deduct $5 for every 100 miles you’ve driven.
Your Truck Is A Business, So Deduct Its Costs Too
If your truck is considered a business vehicle, additional tax deductions come into play. If you’ve bought your truck with a loan or financing, the payments you make on the loan are business expenses. You can also deduct the interest you’ve paid, your vehicle's depreciation, and the insurance cost. If your truck is leased, you can only deduct the cost of the lease. According to the IRS, you can’t deduct the entire lease amount if your truck is leased. In addition to your truck, other business expenses include: - The cost of repairs or maintenance on your trailer - The price of replacing your trailer due to damage on the job - Fees paid to the Department of Transportation for your commercial driver's license (CDL)
Prepare For An Irs Audit
Finally, it’s essential to know that the IRS has a task force dedicated to auditing truckers. The transportation industry is rife with potential tax deductions and misunderstandings. You may receive a letter from the IRS asking to review your taxes. If this happens, it’s essential to have the proper documentation to back up your deductions. Having these records ready and organized before the audit is the best way to ensure you’re ready to defend your taxes.
Conclusion
As a trucker, you are responsible for understanding your profession's tax laws. If you don't, you may miss out on some easy deductions and credits that can save you money.
The tax system is complicated, and there are plenty of ways for truckers to mess up when filing their taxes. But it shouldn't be too difficult if you’re diligent about keeping track of your expenses and other numbers throughout the year.
These tips will keep you from running into issues come tax time so that everything is smooth sailing from here on out.
Or you can get help from Trucker taxes services Stone Mountain, who will do all your taxes and keep records so that you can easily concentrate on your work.
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