Federal Income tax payments for 2024 aren’t due until April 15, but it’s not too late to make changes that could reduce your tax liability for what you’ll pay NEXT year.
The venerable Benjamin Franklin might have said, “Nothing is certain except death and taxes” — but neither the day you’ll die nor the amount of taxes you’ll pay are set in stone.
There are things you can do to help reduce the amount of taxes owed.
One big decision is the structure your business will take.
For instance, a Sole Proprietorship combines your personal finances with that of your business. You file one return, generally with an extra form on which you list business income or loss. You pay taxes on whatever is left after subtracting business expenses and personal deductions.
This is likely the simplest type of business structure, but there are drawbacks.
First of all, the taxes you pay on your income include Self-Employment tax. This tax combines the employee and employer contributions of both Social Security and Medicare taxes, totaling 15.3% of your net income in addition to any income tax owed.
Another drawback of Sole Proprietorship is personal liability. If your business can’t pay its bills, including fines or court judgements, your personal property such as your home can be taken to satisfy the debt.
Partnerships are also liable for Self-Employment tax and personal liability.
A Limited Liability Company (LLC) gets you out of personal liability for business debts but is still subject to self-employment tax. C-corporations and S-corporations relieve you of personal liability, but they’re taxed differently.
The structure you choose determines how complicated and expensive setting it all up will be, but it also impacts your liability and your tax rate.
Vanessa Gant, founder and “money architect” at ProVision Accounting Solutions, recommends utilizing both legal and accounting advisors to guide you to the right decisions for your business.
“If you’re working with a quality financial advisor, you should be getting guidance on how to optimize your business structure,” she said during a Feb. 6 video presentation.
In the presentation, Gant covered other ideas that could work with trucking businesses to reduce tax liability.
One strategy is self-rentals. For example, by keeping a truck in your name and renting it to your trucking business, you can claim the depreciation of the vehicle’s value and maintenance costs from your personal taxes while deducting the rental expense from the business. Rental payments aren’t subject to the Self-Employment tax, so your tax bill goes down.
Understand the ins and outs of depreciation.
Depreciation is a write-off that allows you to deduct the expense of property over an extended period, but it can be complicated to administer.
For example, real estate is typically depreciated over 39 years, while a truck could be depreciated over seven years. There are, however, exceptions, such as improvements made to your property (like a new roof on the garage, or new gravel or concrete for a parking pad). Those can be depreciated on different schedules.
A tax advisor can help you determine what works best for your business, but the general idea is to claim depreciation when it benefits you most. For instance, if your business lost money in 2024, claiming depreciation to lower your tax bill won’t help. Claiming as much depreciation as you can in your profitable years is preferable.
Don’t forget per diem.
In a Dec. 30, 2024, blog post, ATBS reminded truckers that the per diem rate for the transportation industry has increased to $80 per full day ($60 per partial day) as of Oct. 1, 2024.
Before this increase, per diem rates were $69 for a full day and $51.75 for a partial day.
Because the new rate went into effect partway through the calendar year, drivers claiming the per diem on their 2024 returns will need to use the two different rates in their calculations, remembering that the IRS allows for an 80% deduction of the amount used.
For truckers who live in Alabama, Florida, Georgia, North Carolina, South Carolina and parts of Tennessee or Virginia, the filing date for 2024 taxes (as well as 2023, if an extension was filed) has been moved to May 1, 2025. It’s only two weeks after the main filing date, but some may find the change helpful.
Know which losses can be claimed.
Additionally, uninsured or unreimbursed disaster-related losses can be claimed on income tax returns, while any disaster-relief payments received from FEMA or other government agencies are generally not counted as taxable income. Consult your tax professional to be sure.
If you bought a truck or trailer in 2024, you’re allowed to take a larger-than-normal deduction of its value from your taxes: The “bonus depreciation” in 2024 was 60%.
Since last year wasn’t a high-profit year for many trucking businesses, taking the bonus depreciation may be unnecessary and better saved for 2025 or later tax years — but each business is different. A tax preparation specialist can help with the details.
Double check tax forms.
Watch out for the 1099-K. The form is used by platforms such as eBay, Venmo and other vendors if the reported payment(s) exceed $5,000. Unfortunately, services like Venmo are used for much more than business payments, and amounts reported as income to the IRS could actually be payments for other purposes. If you receive an incorrect 1099-K, contact the sender.
Start early.
Finally, ATBS recommends that you gather tax documents as early as possible.
You’ll need all income statements, including any 1099s from the health marketplace, interest income, dividends, taxable pensions, Social Security and others. You’ll also need receipts for your business expenses including registration, taxes, fuel and maintenance, miscellaneous items purchased for the truck, and more.
The more data you can supply your tax preparation specialist, the more you can save on taxes.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
