Taxes for Owner-Operators: What Truck Drivers Get Right and Wrong

Weatherford sits on Interstate 20, and a good number of our clients make their living behind the wheel of a truck they own or lease. An owner-operator's return has more moving parts than almost any other Schedule C we prepare. Here is how the pieces fit.

Employee driver or owner-operator?

A company driver who receives a W-2 is an employee, and under current law most unreimbursed employee expenses are not deductible on the federal return. An owner-operator — leased on to a carrier or running under their own authority — receives a 1099 or settlement statements and is self-employed. The rest of this article is about the second group.

The truck

The tractor is the biggest number on the return, and how it is handled has consequences for years. A purchased truck is depreciated; how quickly is a choice, and the fastest choice is not always the best one, because a truck sold or traded later can produce recapture income. A leased truck's payments are generally deducted as paid, but lease-purchase arrangements are sometimes treated as purchases for tax purposes regardless of what the paperwork calls them. Bring the agreement; the label on it does not settle the question.

Repairs, tires, maintenance, insurance, permits, plates, tolls and scale fees are all ordinary operating expenses.

Fuel

Fuel is deductible in full as a business expense. The International Fuel Tax Agreement filings that track where fuel was bought and where miles were driven are separate from the income tax return, but the records behind them — fuel receipts and trip logs — are the same records that support the deduction. Keep both.

Per diem for meals

Drivers who are away from home overnight can deduct meal costs, and most use the per diem method rather than tracking every receipt. The per diem rate is a published figure that changes, and the deductible percentage for transportation workers subject to hours-of-service limits is more generous than for other businesses. What the method requires is proof of the days away from home — your logbook or electronic logging device records do that. Partial days at the start and end of a trip count at a reduced rate.

The one thing per diem does not cover is lodging. Hotel costs are deducted from actual receipts.

The home base question

Per diem depends on being away from your tax home. A driver with no fixed residence — living in the truck, with no home they maintain and return to — can be treated as having no tax home, which eliminates the travel deductions entirely. Maintaining a genuine residence in Texas matters for more than the mail.

Quarterly estimated taxes

Nobody withholds tax from a settlement check. The income tax and the self-employment tax on the year's profit are the driver's to pay in quarterly installments. Skipping them does not make the tax go away; it adds a penalty and produces an April bill that is genuinely hard to pay. We explained the mechanics in Quarterly Estimated Taxes, Explained Without the Jargon.

Heavy vehicle use tax

Trucks above a certain registered weight are subject to a federal highway use tax filed on its own form, on its own schedule. It is separate from the income tax return, it is a deductible expense, and missing it creates registration problems at the county tax office.

Records that make the difference

• Settlement statements from every carrier, all year
• ELD or logbook records showing days away from home
• Fuel receipts or fuel card statements
• Repair and maintenance invoices
• The purchase or lease agreement for the truck and trailer
• A separate business bank account that every one of these runs through

The drivers who bring us these in a folder pay less than the drivers who bring a shoebox, and the reason is not creative accounting. It is that every deduction is supported.

Where we come in

Our self-employed and 1099 preparation handles owner-operator returns regularly, including the quarterly estimate calculation and the entity question once income justifies it. We serve drivers based in Weatherford, Mineral Wells, Springtown and throughout the region. Call between loads and we will work around your schedule.

Records that survive an audit

The trucking deductions are large, which is exactly why they are examined. The records that hold up are simple but have to be kept in real time: electronic logs or a trip log showing where you were each night for the per diem, fuel receipts or fuel card statements, settlement statements from every carrier or broker, maintenance invoices with the truck identified, and a record of the truck's purchase price and financing. Keep them by year in one place, digital or paper. A driver who can produce those has a defensible return. A driver reconstructing them from memory does not.

Owner-operators based in Weatherford, Springtown, Decatur and along the I-20 corridor are a regular part of our practice. If your first year running under your own authority is ending, sit down with us before the settlement statements are filed away.

This article is general information, not tax advice. Thresholds, forms and rules change from year to year, so confirm the details for your own situation before you file.

Running your own truck? Call RD Precision Tax Service in Weatherford at (817) 480-6649, or request a free estimate. Robert has prepared returns for clients across Weatherford, Parker County and the surrounding North Texas counties since 2017.