The 5 Most Overlooked Tax Deductions for Owner-Operators
February 2013, TruckingInfo.com - WebXclusive
New year - new taxes. That’s what many drivers are thinking after the latest round of tax increases.
Dubbed by some as “Taxmageddon," a $494 billion tax increase will be felt by most Americans this year. That’s an average increase of nearly $3,200 for every worker in the United States. In fact, according to the Tax Foundation, 77% of American households will pay more taxes this year, meaning you’ll likely contribute to the tax increase.
While you can’t legally dodge taxes, you can trim them. The options for doing so may have even been under your nose your entire trucking career. Let’s take a look at the five most overlooked tax deductions for drivers.
Some carriers require drivers to wear uniforms. Others are OK with a flannel shirt and jeans.
If a carrier requires you to wear a uniform, you can deduct it on your tax return. To qualify for a tax-deduction, the uniform must be:
- Required by your carrier
- Not suitable for everyday use
You probably wouldn’t wear a uniform unless required, so the first item is easy enough to determine.
As for the second item, ask yourself whether or not you’d wear it voluntarily. If yes, don’t take the deduction. If no, save some money!
Your uniform and other clothes will need to be cleaned from time to time. Fortunately, you can claim related expenses on your tax return.
While on the road, your laundry expenses are tax-deductible. This is provided that you don’t live in your truck, as you must be away from home to utilize this deduction. Keep all receipts for laundry expenses to ensure this deduction goes smoothly.
3. Satellite Radio
Many drivers are not aware of this, but satellite radio expenses are tax deductible. Since a driver can use it as a tool for weather and traffic information, a business need for this device is established and the IRS treats it accordingly.
This doesn’t mean you can’t deduct satellite radio if you also listen to your favorite bands and shock jocks on there. As long as the satellite radio is for your truck and not a personal automobile or other non-work location, write it off and save a few bucks.
4. Mobile Phone
Your mobile phone is also tax-deductible, provided that it is used for business purposes.
Keep all phone records to verify that your phone is used to make business calls. During an audit, the IRS may ask for proof to back up your deductions.
To illustrate, trucker Hatem Elsayed lost a tax court case involving mobile phone deductions. He substantiated his claim of paying for the phone, but did not keep detailed logs of his calls. Thus, he was denied a mobile phone deduction because he couldn’t prove the business use of his phone.
5. ATM, Bank and Credit Card Fees
Fees for your various financial transactions are also tax-deductible. These include ATM fees, bank charges and credit card fees.
As with any other deduction, such fees must be for business purposes. Therefore, it is a good idea to separate your business and personal expenses.
Keep separate bank accounts and credit cards to use exclusively for business. Then, during each tax season, you’ll be able to calculate your deductions more easily instead of sifting through a combination of business and personal expenses. If Uncle Sam comes knocking, you can simply show your statements as proof instead of explaining each item individually.
The Bottom Line
While taxes are a fact of life, drivers can minimize them by claiming these often-overlooked deductions. You may be able to do so retroactively, as well. A qualified tax preparer who understand the trucking industry can review previous tax returns and help drivers claim missed deductions.
Keep the mentioned deductions in mind as you complete your tax return this year. For specific advice, consult a tax professional.
Scott Christensen is vice president of Tax Services at Equinox Owner-Operator Solutions