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Taxes & Trucking for 2018

The Tax Cuts and Jobs Act that was signed into law by President Trump on Dec. 22, 2017, contains numerous changes that will affect individuals, as well as businesses large and small. The new tax law has both good and bad news for company drivers but mostly good news for owner-operators and fleet operators.

Owner Operators – Sole Proprietors or S-Corporations

Self-employed individuals and companies will get the same deduction they have always had in the past. Owner-operators will still be able to take a per diem for meals and incidentals, just as they have in the past, since they are in business for themselves, and those costs are deductible business expenses. The new law also implements a 20 percent deduction on net business profits of Pass-Throughs which includes S corporation or sole proprietorship to non-corporate taxpayers, including trusts and estates. That translates to annual savings of $2,000 or more for many owner-operators. This change will take effect for the 2018 filing year, not for 2017 filings, which are due April 17.

Also, ditched by the new tax law is the health insurance mandate, which carries tax penalties of between $695 and $2,000 a year for owner-operators don’t have a health insurance cover. This, however, won’t take effect until 2019 filing returns meaning that owner-operators who haven’t complied will face tax penalties if they remain uncovered.

Company Drivers, or Employees of Trucking Companies

Notably, the bill is expected to be the end of the daily $63 per diem deduction allotted to truck drivers for on-road meal expenses, incurred because of the nature of being on the road. This means that employee truck drivers whose carrier does not pay them a per diem allowance will no longer be able to take the costs of meals and incidentals as an itemized deduction. It may, however not make such a significant difference to a majority of such drivers since the new tax law also doubles the standard deduction for taxpayers. That means that the change will impact fewer drivers. The standard deduction will increase to $24,000 from the previous $12,000 for married couples filing jointly, $9,550 – $18,000 for heads of households while for single filers it will jump from $6,300 to $12,000.

It should be noted that carriers that pay their employee drivers a separate per diem allowance and then get a tax deduction for it will not be affected. Such drivers will benefit from tax-free per diem in addition to the new higher standard deduction.

Business Tax changes

Corporate tax rate drops to a flat 21% from 35%. The Act lowers the income tax rate for corporations beginning in 2018 to 2025 barring any further legislation. Trucking companies will see a considerable benefit at year’s end when they file their 2018 tax returns. Since companies are getting a huge tax cut, it’s anticipated that they will surely pass it on to their workers.

The new US tax law generates a lot of major benefits for the trucking industry. It’s crucial for owner-operators and fleet owners to educate themselves on the new tax law and its current and continued impact on their operations and opportunities.

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