By Robert Lake
Remember how fun it was to finish opening all your presents and then, after everything is cleaned up and the wrapping paper thrown out, one last unexpected gift remains? That’s what happened to truckers this year when the Internal Revenue Service tossed out a nice, fat bonus.
The IRS increased the per diem for this year, which means you can deduct more from your federal income tax for each day you’re on the road. The per diem jumps from the 2005 rate of 70 percent of $41 per day to 75 percent of $52 a day deduction claim. If you want to forgo the per diem and calculate your actual meal expenses using receipts, you can deduct 75 percent in 2006. Most truckers find that just claiming the per diem is easier to keep up with and more profitable.
Bob Pitcher, American Trucking Associations’ vice president of state laws, says the IRS plans to eventually allow truckers to go back to deducting 80 percent of their daily meal expenses. The deduction was cut back to 50 percent after reports that the deduction was abused by businessmen with their infamous, three-martini lunches.
Truck fleets and trucking advocates complained that the 50 percent rule was not fair to truckers and that they were far removed from the extravagant excesses that caused the furor against meal deductions. Fleets pressured Congress to phase back in a more realistic meal deduction for truckers. “Their employees were required to be on the road constantly, were not likely to spend extravagantly at truckstops and were subject to DOT hours-of-service rules and other regulations that restricted their schedules to an extent,” Pitcher says.
Kevin Rutherford, a transportation industry financial consultant, always recommends taking the per diem rate, which requires no documentation other than log books. It approximates the amount spent daily on meals and other over-the-road expenses. What this means for the average owner-operator or company driver is that under the new rules, you could end up with an additional several thousand dollars in your pocket. And now is the time to really unwrap this gift.
“This is a huge opportunity for truckers to do two things with this additional income – pay down debt and add money to their retirement accounts,” Rutherford says. “It’s rare for the industry to see this kind of windfall. An increase like this is a bolt from the blue. I’m advising my clients to invest wisely and use this opportunity to get ahead of the game.”
While there’s other good news floating around the trucking industry – reduced truck fatalities, lower diesel fuel prices and continued strong demand for drivers – there’s nothing quite as sweet as a little extra jingle in your pocket. Especially when it was so unexpected.