In the per-diem weeds with company drivers

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Updated Mar 28, 2023

As an owner-operator, you spend a lot of time on the road, as you can see in results from recent polling of Overdrive‘s mostly owner-operator audience:

Owner-operators’ average time away from home for most trips

Results current as of midday Monday, April 3.

If you’re an owner-operator, the standard federal per diem deduction for meals for any day away from home is 80 percent of $63, or $50.40. Multiply that by the number of days away from home annually and you can see the substantial size of the deduction for tax purposes, reducing your taxable income.

The handling of the deduction for owner-operators is fairly simple, but if you’re a company driver paid via W2, with some tax withholding, things can get complicated, as a reader noted in email over the weekend:

I hope you can clarify something for me. I recently retired, & returned to OTR. Tax codes have changed.

A very helpful Overdrive article cites five tax deductions for us. I’m unclear on the meals deduction. You cite that the IRS allows $63 per day, when living on the road. You write that we’re allowed to claim 80% of that for a deduction. My question is my employer pays me $40 (taxed) per day, for meals & miscellaneous. Am I only supposed to claim 80% of the $40, or should I still use the $63 amount? Tried looking it up on the IRS site, but of course they garbled it in a book-length treatise …

Mike Calahan at ATBS, the company’s head tax man, notes the reality that carriers treat per-diem allowances differently, as the reader implies. “If the carrier subjects the reimbursement to tax,” Calahan notes, “then the driver would be entitled to 80 percent of $63 for a full day away from home.”

That answers the reader’s question, given his tax situation. However, Calahan adds, “if the carrier reimburses for per diem on a pre-tax basis, then the driver would be entitled to a deduction for the difference between 80 percent of $63 and the per diem reimbursement for each full day away from home.” In the case of a $40 pre-tax reimbursement, that would mean $10.40 per day, ultimately.

If you’re a W2 employee driver, how does your carrier handle it?