How to write off meals away from home when Truck drivers file taxes
Tax season can be stressful for truck drivers filing tax, especially when figuring out the best way to write off meals away from home. Here are two options that you should consider.
The actual expenses method for meals allows you to deduct up to 80% of the cost of each meal, with the 2021 and 2022 tax years providing an increased deduction rate of 100% for restaurant meals.
For self-employed individuals, typically only 50% of business meals can be deducted on taxes. However, transportation workers like truckers are eligible for more generous tax break regulations due to their obligations under federal hours-of-service limits. It is unnecessary to drive a certain number of consecutive hours before taking a meal break to receive the 80% deduction; being subject to the rules is enough for eligibility. To use the actual expenses method, an accurate record must be kept that tracks all costs related to each meal, including taxes and tips.
The per diem allowance for Commercial Truck Drivers
In addition to actual meal expenses, truckers may also opt for a standard per diem allowance. Again, 80% of this can be used as a tax write-off.
When deciding which rate to go with, there are two options available; one is slightly more generous than another.
When it comes to per diem allowances, travelers have two options. First, the general federal set of rates can be looked up on the General Services Administration website.
Additionally, those in the transportation industry have access to special per diem rates that simplify their journey as they no longer need to search for specific rates each time they make a stop.
Unfortunately, travelers cannot switch between these two options, thus requiring them to choose between either the general federal rate or the transportation rate.
Do you want to know the special transportation per diem rate for 2022?
When considering travel expenses in 2022, you may ask whether to use actual expenses or a per diem rate. Regarding transportation for full days on-site away from home, a per diem rate is available in the Continental US, which grants an allowance of $69 and tax write off amount of $55.20 per day. However, for partial days away working, it drops to 75% of that full-day rate with a corresponding 80% tax deduction write off – allowing for a daily allowance at $51.75 and tax write off amount per day at $41.40.
Rather than using the easier per diem method, you should focus on the one that saves you the most money. Therefore, it is advisable always to be mindful of how much you are spending on meals. With this in mind, you can easily compare your write-off amount with each method and determine which offers more cost savings.
Calculating these savings with some help may seem tedious and time-consuming. Fortunately, PriorTax simplifies the process by tracking all meal transactions for ease of comparison. This takes away the need to rely solely on convenience when opting for the per diem approach – allowing for more efficient decision-making based on accurate figures.
Can you use a per diem rate for anything other than meals?
Do you know that you are allowed to write off more than just meal expenses through per diem rates? It’s true – a so-called per diem for “incidental expenses” allows travelers to deduct $5 in travel-related service fees and tips. This fee is not restricted by the 80% cap imposed on meals, it stands at a flat rate of $5 per day.
It might seem insignificant, but this allowance allows individuals to pack their own food from home without needing to search for specific amounts on hotel invoices. In addition, the amount of paperwork involved with self-employment tax filing is already time-consuming; services like PriorTax and its Tax Professionals offer help sorting out the details.
On What Taxes can PriorTax Help Independent Truck Drivers with?
PriorTax can help independent truckers understand the taxes they are responsible for. There are typically three or four types of taxes truckers must pay: Federal income tax, state income tax (depending on where you live), self-employment taxes (Social Security and Medicare taxes), and/or International Fuel Tax Agreement, or “mileage” taxes. In addition, truckers usually need to make payments to the IRS on a quarterly basis, with deadlines falling on April 15th, June 15th, September 15th, and January 15th of the next year. To get an idea of how much in quarterly taxes may be owed, our free calculator is always available for your convenience.
Federal Income Tax for Commercial Truck Drivers
When it comes to paying your taxes, one of the most important things you need to know is the current rate for your bracket. Depending on how much you make annually, this could range from 10% all the way up to 37%.
State income tax for Commercial Truck Drivers
The individual’s residing location determines income tax. Certain states do not implement this type of taxation at all, while others offer two strategies: progressive and flat tax rates. The former levies a percentage of an individual’s annual income, ranging from 0-11%, whereas the latter imposes one fixed rate that applies to all inhabitants in the area.
Progressive tax: Rates based on your income level, with typical ranges from 0% to 11%
Flat tax: The same rate for everyone in the state
Self-Employment Tax for Commercial Truck Drivers
As an owner-operator, you are uniquely positioned to cover the full 15.3% obligation for FICA taxes (used to fund Medicare and Social Security). On the other hand, traditional employees only pay 7.65%, with their employers covering the remaining half. This is why it’s referred to as “the hardworking taxpayer’s tax”, or simply “the friendly ‘you have to do it all by yourself’ tax”.
Fortunately, when you file your taxes at the end of year, this amount will be accounted for in adjustments to your taxable income – ultimately lowering your income taxes! With PriorTax makes this process much easier and stress free. Our dedicated Tax Professionals will calculate these deductions for you from start to finish.
The International Fuel Tax Agreement (or more commonly known as “IFTTA”) tax is a form of taxation applicable to individuals operating motor vehicles for the purpose of transporting cargo and/or people between different states or Canadian provinces. Specifically, those who drive trucks with three or more axles, two axles weighing at least 26,000 pounds, or with a trailer with a combined weight of more than 26,000 pounds must comply.
This tax on motor fuel applies to drivers who do any of the following:
Drive cargo (or people) between different states or Canadian provinces
Drive a commercial truck with three or more axles
Drive a commercial truck with two axles that weigh at least 26,000 pounds
Drive a commercial truck with a trailer, where their combined weight is over 26,000 pounds
How to pay your IFTA taxes
When filing your International Fuel Tax Agreement (IFTAs) taxes, many states make it easy for you by providing an online portal. Just do a quick Google search for “[state] file IFA taxes online,” and you can get started right away. To use this hassle-free method, you must gather the total miles traveled and gallons of gas purchased in each state – the portal will take care of the rest!
Those who cannot take advantage of the convenience of an online filing option in their state must take two additional steps to complete the process. Firstly, they must calculate the fuel mileage across all states that have been driven during the quarter. This can be easily done by dividing the total miles traveled in all states by the number of gallons purchased in each state-information which can be obtained from completing steps one and two. Secondly, they need to determine how many gallons were burned while traveling through each individual state in that same time frame; this is achieved by dividing the total miles driven through that particular place by their overall fuel mileage.
How IFTA taxes work for Commercial Truck Drivers
Since 1983, the International Fuel Tax Agreement (known as “TFA”) has allowed truckers to only pay fuel taxes in their home state. Before this, drivers were required to file separate returns and pay taxes in each jurisdiction where they operated. With TFA, all that hassle is gone!
Truck drivers who need to pay fuel taxes can benefit from the International Fuel Tax Agreement (EITA). This tax applies in all 48 states across the continental US, plus all 10 Canadian provinces. Luckily, drivers can write off EIRA payments as a business expense on their Schedule C – list it under box 23.
Conveniently, truckers have access to automated accounting software that helps manage the full range of responsibilities associated with independent driving. Not only will this software simplify your taxes, but it also has the potential to help you save money.