One of the earliest and most devastating realizations we come to as adults is that paying taxes can be stupid and unnecessarily complicated. And that’s just income taxes! Tax preparation gets a lot more difficult when you straddle the two roles of trucking business owner and truck operator in the trucking industry.
As a truck owner/operator, whether independent or working for a larger company, it’s vital to maintain your trucks, comply with safety regulations, and ensure proper loading and securing of the cargo for transportation. Additionally, obtaining and maintaining necessary permits and licenses for these operations is also a key responsibility.
As an owner/operator working for a trucking company, you usually won’t be required to file your own taxes. However, you may need to do so if you qualify for specific tax credits or deductions. If you are self-employed, you will be responsible for filing your own taxes, too.
Figuring out if you need to do your own taxes is just the beginning. There are a bunch of other things you need to figure out too, like what taxes you have to pay as a truck driver and how to figure out how much. You’ll also want to know what deductions you can take. It might seem like a lot, but we promise it’s manageable once you get organized and learn about the process. This guide will give you a simple explanation of everything you need to know to prepare your taxes as a truck driver.
The Types of Taxes Truckers Must Pay
As an owner/operator, you are in a unique position when it comes to the various taxes you must pay. It’s important to remember that trucking companies are subject to the same business taxes as any other business. These taxes include:
- Federal and state income taxes: Truck owner/operators who are sole proprietors or partners in a business might need to pay these.
- Self-employment taxes: Self-employed truck owner/operators (such as a sole proprietor or independent contractor), may need to pay self-employment taxes to cover Social Security and Medicaid.
- Property taxes: Any truck owner/operator who owns property, like a garage or storage facility, may need to pay taxes on that property.
- Sales and use taxes
There are also certain taxes unique to trucking companies, such as:
- Fuel taxes
- International Fuel Tax Agreement (IFTA) tax: Drivers that operate in multiple states may be required to pay IFTA taxes on the fuel they use. This tax is used to apportion fuel taxes among the states in which a trucking company operates.
- Heavy Vehicle Use Tax (HVUT): Truck drivers that operate vehicles with a gross vehicle weight of 55,000 pounds or more may be required to pay HVUT to the federal government. This tax is based on the number of miles driven a year, as well as the weight of the vehicle being driven.
- Federal Highway Use Tax (FHUT): Truck drivers that operate vehicles with a gross vehicle weight exceeding 55,000 pounds and use the federal highway system might be required to pay FHUT. While FHUT is specifically for vehicles that use federal highways, HVUT applies to all vehicles that meet the aforementioned weight requirement, regardless of whether or not the federal highway system is used.
The taxes truck owners/drivers need to pay depend on their specific business and the state they are registered in. It’s a good idea to get advice from a tax professional or lawyer to make sure you’re following all the necessary tax laws.
How to Calculate Taxes
For truck driver tax preparation, there are several factors that need to be considered when calculating taxes:
- Gross income: Drivers must report gross income, which is the total amount of money earned from all sources before any deductions are made. This includes revenue from hauling freight, and any other sources of income, like rental income from leasing equipment.
- Deductions: Deductions can be claimed for business-related expenses like the cost of fuel, maintenance and repairs. Deductions may also be applied to other business expenses, such as rent, salaries, and insurance. More on deductions later.
- Tax rate: The tax rate that must be paid will depend on gross income and the tax laws in the jurisdiction out of which the business operates. Federal and state income tax rates are generally progressive, meaning that the tax rate increases as income does.
- Tax credits: Truckers may be able to claim credits for certain activities, such as hiring employees eligible for the Work Opportunity Tax Credit, or for making energy-efficient vehicle improvements.
Important Deductions to Take
When truckers are filing their taxes, they need to keep track of their spending and show that the expenses were for their work. Truck drivers can claim deductions for things like fuel, vehicle maintenance, and insurance. If you own your own truck, you may be able to get a tax break for the vehicle’s depreciation. You might also be able to get a deduction for using part of your home as an office for work. Other expenses like business travel, permits, and work-related equipment can also qualify for deductions.
Remember, when it comes to doing your taxes as a truck driver, there are a lot of things you can claim to reduce how much tax you owe. To make sure you’re getting all the deductions you’re eligible for, it’s a good idea to get advice from a tax professional or lawyer. Also, keep in mind that there are some things you can’t claim as deductions, like the cost of your daily commute, time when you’re not working, regular clothes, and any personal expenses.
Ways to Save
When it’s tax season, keeping track of all your business expenses and saving receipts is really important. If you don’t have records of your expenses, you won’t be able to deduct them from your taxes. It’s also helpful to keep a detailed list of all your business costs, including automatic expenses like scale tickets and tolls. Consider getting a separate credit card just for business expenses.
You might also want to think about putting money into a retirement fund. Contributions to retirement funds like IRAs, SEPs, or 401(k)s can be tax-free until you start using the money. Another tip is to buy supplies you’ll need for your business, like prepaid tires or insurance, at the end of the year. Spending money on these essentials ahead of time can help lower your tax bill for the upcoming year.
Remember to always be ready for a tax inspection. Around 4% of tax filings from self-employed individuals earning over $100,000 get selected for review. That’s why it’s important to keep good records and stay informed about your finances! Keeping detailed records and understanding your income and cash flow will help you make more money, pay fewer taxes, and protect yourself from difficult tax audits.
Get HVUT Filing Done Easily
These tips should make tax preparation for truck drivers simpler. File 2290 and pay HUVT, the Heavy Vehicle Use Tax (HVUT) with i2290. With i2290, you just need to create an account, answer some basic questions about your business, and you’ll get your IRS-stamped Schedule 1 in minutes. i2290 also keeps your tax documents organized and easily accessible online. Plus, if you need help at any point, their support team is there for you.
