With the April 18 deadline to file 2016 income taxes looming, owner-operators’ accountants are busy tallying up lots of deductions for their clients. For every $1,000 in deductions, those in the 15 percent tax bracket, common for those married filing jointly, see a tax reduction of $150 plus any applicable reduction in state income tax. Savings would be higher for those in the 25 percent bracket.
Here are five of the most common deductions, says trucker tax expert Dennis Bridges, an Atlanta-area CPA who works with about 1,000 owner-operators. Estimated savings examples are based on the 15 percent bracket.
Meal expenses: Drivers are allotted a per diem for meals of $63 for each day on the road, even if only a fraction of that is spent, says Bridges. Of that, 80 percent ($50.40) is deductible. Potential savings: $2,300. A driver on the road an average of six days a week would see a net deduction of $15,725, yielding more than $2,359 in tax savings.
Small purchases: “Many of our new clients think of this as a nickel-and-dime category,” Bridges says, but spending on supplies and small equipment adds up. “Everything from tarps to tiedowns and log books.” Potential savings: $400. Deducting $50 a week for 52 weeks would knock $390 off your tax bill.
Local mileage: If you, your spouse or significant other makes trips in a personal vehicle on behalf of your business, count the roundtrip miles as a deduction. Such trips could be to Walmart to pick up supplies or to pick up your truck at a shop after maintenance. Use a notebook to record the date, total miles, destination and purpose of the trip. Potential savings: $100. The IRS allows a deduction of 54 cents per mile driven. Claiming 25 miles a week would reduce your tax bill by $105.
Phone bill: “The IRS has ruled that, in most cases, the full cost for cell phone and monthly service for trucking professionals is fully deductible,” says Bridges, “even if reasonable personal use is made.” Potential savings: $200. If your phone bill is $125 a month, and you bought a new phone last year for $200, you could take a deduction of $1,700 – saving $255.
Home office expenses. “Expenses incurred for business furnishings are fully deductible,” Bridges says. “Desks, chairs, bookcases, filing cabinets and the like, and obviously items like a laptop or iPad.” The IRS also allows a deduction for space devoted to a home office, but the space must be used “regularly” and “exclusively” for business. That means no personal use of the room or a home office computer. Potential savings: $200. The IRS allows you to take $5 a square foot, up to 300 square feet, for an office space. If you count a 10-foot square bedroom as an office and spent $800 on office supplies and a new computer last year, you could lower your tax bill by $195.