Posts tagged ‘truck expenses’

Our tax laws are written broadly so that they can be applied to all taxpayers. These broad laws are difficult to apply to taxpayers who work in some specific industries. The trucking industry is a prime example. This makes it difficult to answer even simple tax questions, such truck driver tax deductions are available. This article provides an ten step process for determining whether an expense is likely to be tax deductible.

Step One: Ordinary & Necessary Expense

The first step is to determine whether the expense is ordinary and necessary for a truck driver. The shorthand way to answer this is to ask yourself whether a third party would agree that a truck driver would need to incur this particular expense. Another way to think about it is whether you would feel comfortable describing the expense to the IRS if it audited your tax return.

Step Two: Unreimbursed Expense

The second step is to consider whether the expense was reimbursed by an employer or other party (such as an insurance company). Generally, expenses that are reimbursed by a third party are not deductible. Also, expenses are not deductible if they could have been reimbursed by an employer or third party, but are not reimbursed merely because you did not seek reimbursement.

Step Three: Not a Personal Expense

The third step is to determine whether the expense is a personal expense. Generally, personal expenses are those that you would incur even if you were not working as a truck driver.

Here are some examples of personal expenses for truck drivers: laundry bag, containers of laundry detergent, Visine eye wash, air fresheners, bunk heater, down pillows, sets of sheets, sleeping bag, storage container, coffee pot, cooler motor, personal hygiene items, travel bag, refrigerator, sauce pan/tin foil pans, showers, thermos bottle, lunchbox ovens, toiletries, cleaning supplies, disinfectant, hand cleaner, bags of epsom salt, and identity theft insurance.

Here are some examples of common business expenses for truck drivers: professional supplies (briefcase, calculator, camera, faxes, film developing, dry erase markers, and pens/pencils); misc. expenses (union or trade association dues, state or local government licenses and regulatory fees, liability insurance premiums, trade publication subscriptions, ATM fees, check re-order fees, interest on loan, Medical exams (DOT physical, drug tests, sleep apnea study), cargo straps and chains, dry cleaning for uniforms, logbooks).

Step Four: Not for Personal Clothing

The fourth step is to consider whether the expense is for personal clothing. Expenses for personal clothing are not deductible. Clothing is not personal if it is (1) required or essential for the job, (2) suitable for general or personal wear, and (3) is not worn outside of business.

Here are some examples of personal clothing: sunglasses, thermal underwear, tennis shoes, and sweatshirts. Here are some examples of business clothing: insulated coveralls, hard hat liner, rain gear, safety glasses, steel-toed boots, winter work boots, and work gloves.

Step Five: Not for a Fine or Penalty

The fifth step is to determine whether the expense is for a fine or penalty. Fines and penalties are not tax deductible. Traffic tickets and tax penalties are examples.

Step Six: For Travel Expense While Away from Home

The sixth step is to determine whether the expense is a travel expense for traveling away from home. This includes meals and lodging while away from home. It can be difficult to determine whether a truck driver is “away from home.” A tax home is generally where your place of business is located. Over-the-road truck drivers may not have a tax home and travel expenses may not be deductible.

If the truck driver does have a tax home, the truck driver has to decide whether to use the actual expenses or the per diem rates for meals and lodging provided by the IRS. These rates can be used in lieu of actual expenses, which makes it easier to document the amount of these expenses.

If the per diem rates are not used (and for non-meal and lodging travel expenses), the truck driver must keep records showing:

  1. The amount of the expense.
  2. The departure and return date for each trip, the number of days spent on business, and the destination/area.
  3. The business purpose for the expense.

Step Seven: For Property Used for Entertainment, Amusement, or Recreation

The seventh step is to determine whether the expense is for property used for entertainment, amusement, or recreation activities. Expenses for entertainment, amusement, or recreation activities may be deductible if they meet the directed related or associated test.

Directly related test requires that the:

  1. Entertainment took place in a clear business setting, or
  2. Main purpose of entertainment was the active conduct of business, and
    a. You did engage in business with the person during the entertainment period, and
    b. You had more than a general expectation of getting income or some other specific business benefit.

The associated test requires that the:

  1. Entertainment is associated with being a truck driver, and
  2. Entertainment is directly before or after a substantial business discussion.

These expenses also cannot be deducted if they are lavish under the circumstances. Even then, the deduction is limited to 50% of the expense.

Also, you have to have proof to show:

  1. The amount of the expense.
  2. The date, name and address/location of place of entertainment.
    The business purpose for the expense.
  3. Here are a few examples of non-deductible expenses: TV/VCR, Books/Novels, DVD movies, DVD player, Books/Magazines, and VCR tapes rented.

Step Eight: Not a Gift

The eighth test is to determine if the expense was a gift. Gifts to non-employee individuals are limited to $25 per person per year.

To be able to deduct a gift, you have to have proof to show:

  1. The amount of the expense.
  2. The date and description of the gift.
  3. The business purpose.

Here are some examples of gifts: gratuities paid to truck loaders/unloaders.

Step Nine: Related to Your Truck

The ninth test is to determine whether the expense is related to your truck. Truck drivers cannot use the standard mileage rate.

There is a special provision for truck drivers, which says that you do not need a contemporaneous mileage log showing the amount of the expense, the time and place of travel, and the business purpose of the expense. This exception applies if substantially all of the use of your truck is in a trade or business of providing to unrelated persons services consisting of the transportation of persons or property for compensation or hire.

Here are some examples of expenses related to trucks: truck depreciation (or lease payments), fuel, oil, truck maintenance, truck repairs, tires, truck insurance, truck registration fees, truck oil changes, truck storage fees, truck licenses plates, trick washing, heavy highway use taxes, parking, and truck stop electrification.

Step Ten: Related to a Computer or Peripheral

The tenth step is to determine whether the expense is related to a computer and related peripheral equipment.

These expenses may be deductible if you have proof of:

  1. The amount of the expense.
  2. The time and place of use of the property.
  3. The business purpose of the use.

Tax Deduction

Whew! That is all of the steps. Expenses that survive this gauntlet of rules are generally deductible. Contact us if you are a truck driver and have questions about whether an expense is deductible. We help truck drivers tax problems.