Spending to Cut Tax Bill

The per diem allowance for meals on an overnight trip is $41 per day for 2004 (and 2005) taxes, up $1 from last year. Also, the deductible portion rises from 65 percent in 2003 to 70 percent in 2004 (and 2005). In other words, the effective amount counted as a business expense is increasing from $26 to $28.70.

Unless you’re routinely spending more than $41 a day for meals, don’t worry about keeping meal receipts – just claim the per diem and count your overnight hauls. You have to use one method or the other for the entire year.

Look at your planned expenditures for the next three or four months. It could be a smart move to write those checks before Dec. 31 to get the tax benefit for 2004 instead of 2005.

Tires tend to be the biggest and most commonly accelerated expense, says Kevin Rutherford of The Alliance, an owner-operator financial services company in Orlando, Fla.

“If you’re going to need them in January or February and taxes are an issue, let’s buy them in December,” he says. Most dealers, not wanting to turn down $3,500 to $5,000 for a set of 10 tractor tires, will let you pay now and take delivery later so you don’t have to scrap tires before their time.

The same goes for other business spending, from hard goods, such as a bypass oil filter or a gen-set, to maintenance, such as a tune-up. Especially consider anything that will lower fuel or maintenance costs. “With anything that’s going to save you money, the longer you wait, the more you’re losing,” Rutherford says.

There are some gray areas in passing muster with the Internal Revenue Service, such as entertainment costs. Satellite radio, like satellite television, is OK because weather and news is important to owner-operators, Rutherford says. Items used strictly for entertainment, such as a DVD player or a digital music player, are questionable, he says. However, if you can show you’re using the gadgets to play job-related content, then they’re tax-deductible.

It also can be a good idea to accelerate a large purchase, such as a tractor or trailer, even though it will be depreciated over years. Your accountant can help you decide how aggressively to handle your depreciation schedule.

And if you’re not up on your tax situation, your accountant also can help you figure how much – if anything – you stand to gain by moving up any business spending. “If you don’t have a tax problem, you don’t want to be buying anything in December,” Rutherford says. “Wait until January and use it next year.”