Truck drivers are an essential part of our economy, transporting goods across the country to keep businesses running smoothly. Trucking expenses can add up quickly. This puts truck driver tax deductions high on the list of concerns for most truckers.
Truck driver tax deductions are expenses that can be deducted from taxable income, reducing the overall tax burden for truck drivers. These deductions can include everything from fuel costs and maintenance expenses to meals and lodging while on the road. Even cell phone bills can be included as a deductible expense.
To claim these deductions, truckers have to keep accurate records of their expenses. This includes keeping receipts or other documentation as proof of the expense.
The IRS frequently disallows trucking expenses for the lack of records. The recent Elsayed v. Commissioner, T.C. Summary Opinion 2009-81, provides an opportunity to consider this common tax problem for truck drivers.
Facts & Procedural History
Elsayed was employed as a truck driver for Swift Transportation and A-Z Transportation in 2003 and 2004.
Elsayed maintained a home in Texas, but he was an active driver during 2004 logging 268 days away from home.
Swift and A-Z reimbursed Elsayed for certain expenses including tolls, scales, showers, truck supplies, truck washes, motels, lumpers (people hired to help unload the truck), and truck repairs.
Swift and A-Z did not reimburse Elsayed for maps, tools, meals, clothing, bedding, coolers, batteries, office supplies, first aid kits, or air fresheners.
Elsayed kept receipts for his purchases in separate envelopes by category and used a home computer to help record his driver logs and account for his expenses.
The IRS audited on Elsayed’s Form 1040, Individual Income Tax Return, for 2004.
The IRS disallowed deductions taken for meals and unreimbursed supplies.
About Tax Deductions for Truckers
Section 162 says that businesses can deduct ordinary and necessary business expenses. This deduction is subtracted from income to compute profit, and the tax rate is applied to the profit.
These expenses are deductible for those who operate as contractors. Those who work as employees generally cannot deduct their business expenses. Congress made this change in 2017 as part of the Tax Cuts & Jobs Act (“TCJA”).
What is ordinary and necessary varies from one business to another. Here is a list of common tax deductions for truck drivers:
- Fuel Costs: Fuel is one of the most significant expenses for truck drivers. Fortunately, it is also one of the most common tax deductions available. Truck drivers can deduct the cost of fuel used while driving for business purposes.
- Maintenance and Repairs: Trucks require regular maintenance to keep them running smoothly on long hauls. Expenses related to maintaining and repairing trucks can be claimed as a tax deduction.
- Meals and Lodging Expenses: Truck drivers who travel away from home overnight for work may be able to claim deductions for meals and lodging expenses. The IRS sets specific limits on how much can be deducted per day based on location.
- Depreciation: Depreciation refers to the decrease in value over time of assets used in your business operations, such as your truck or equipment. The depreciation expense can be claimed as a deduction each year over several years.
- Uniforms: Many companies require their employees to wear uniforms or protective gear while working. If this is the case, then these items’ cost could potentially be claimed as a deduction on taxes.
- Safety Gear: Similarly, safety gear such as hard hats, steel-toed boots, and gloves can be claimed as a tax deduction.
- Communication Devices: Truck drivers need to stay connected while on the road. The cost of communication devices such as cell phones or two-way radios used for business purposes can be claimed as a tax deduction.
While most of the expenses related to driving a truck as a truck driver are deductible, there are some exceptions. For example, fines and penalties for traffic violations are generally not deductible. This means that if a trucker receives a ticket for speeding or running a red light while driving their truck for work, they cannot deduct the cost of the fine or penalty on their taxes. Personal expenses, like personal meals and entertainment, are also not deductible. Expenses for personal grooming or clothing are also generally nondeductible.
Meal Expenses While Away From Home
If a truck driver is away from home overnight due to work-related travel or duties, they can use either the per diem or actual cost method to calculate their meal deduction. The per diem method allows them to deduct a fixed amount per day based on IRS guidelines. The actual cost method allows them to deduct the actual cost of meals consumed during their trip.
Elsayed deducted expenses for meals while he was away from home working as a truck driver. Elsayed determined the amount of the deductible meals by adding up amounts listed on receipts that he kept.
The IRS agent allowed Elsayed a fixed $31 per diem rate for the 268 days that Elsayed was away from his home. This $31 per diem rate is set out in Rev. Proc. 2003-80.
The court followed the IRS’s method, but did not agree with the per diem rate the IRS used. The court noted that Rev. Proc. 2003-80 provides an increased $41 per diem rate for employees in the transportation industry–which includes truck drivers.
The IRS agent had also limited the deductible amount of the meals expense by fifty percent, given the rule in Section 274(n). The court agreed that the expense should be limited, but noted that Section 274(n)(3)(B) provides a more generous seventy percent allowance for individuals subject to “the hours of service limitations of the Department of Transportation.” Truck drivers like Elsayed meet this requirement as the Department of Transportation limits the hours and times that truck drivers can operate their trucks.
Meal Expenses While at Home
Elsayed also deducted expenses for meals while he was not away from his home and working as a truck driver.
The court made the following observations about these expenses:
his employers did not require the meals, the meals had a business purpose in that they gave him an opportunity to meet with other drivers to gain their wisdom as to how best to advance his driving skills, e.g., learning safety tips, the rules for hours worked, and how to increase his earnings. Petitioner wrote on the backs of the receipts the first but not last names of the person(s) with whom he ate. He did not record the business purpose of the meals. Included in the total were payments of $225 and $200 to purchase meals for several other drivers as appreciation for their advice.
The court concluded that these expenses were not deductible, as they were personal expenses and were not “directly connected” to his trade or business of being a truck driver. This is the general rule. Personal expenses are not deductible for tax purposes. Expenses that are not directly connected to a trade or business are also not deductible. Thus, the court did not allow Elsayed to deduct these expenses.
Elsayed also deducted a number of expenses for supplies that he used in his trade or business of being a truck driver.
The court made the following observations about these supply expenses:
many of the receipts just showed dollar amounts with a cryptic description, e.g., a credit card purchase for $26.97 for “Luggage Ro EAC” from an unidentified store, and $43.29 for “G-R-O-C” from the Drivers Travel Mart in Anna, Texas. Many other receipts had no description at all, such as a $323.83 credit card receipt from Wal Mart in Houston, Texas; $23.46 from the Flying J Travel Plaza in Carmel Church, Virginia; and $13.65 from Travel Centers of America in Tallulah, Louisiana. A few receipts had an apparent business purpose: $75.73 for a CB radio, $59.95 for an atlas map, and $5.76 for a small map. However, most of the other identifiable purchases were for seemingly personal purposes: $115.26 from a Wal Mart in Humble, Texas, for shampoo and office supplies; and $99.86, $188.84, and $19.99 from a Sam’s Club for an executive chair, an L-shaped desk, and Nike tennis sneakers.
The court concluded that these descriptions were not sufficient as Elsayed did not provide adequate substantiation establishing a business purpose for the expenses under Section 274(d). Section 274(d) provides a higher substantiation for these types of expenses. Thus, the court did not allow Elsayed to deduct these expenses.
Truck drivers can claim several tax deductions, including fuel costs, maintenance and repairs, meals and lodging expenses, depreciation, uniforms, safety gear, and communication devices. However, as this case shows, it is essential to keep accurate records and proper documentation of the expenses to avoid IRS disallowances. This case highlights the importance of adequate substantiation and records for unreimbursed expenses, meal expenses while at home, and meal expenses while away from home. Truck drivers must keep detailed records of their expenses to claim tax deductions and ensure that they pass IRS scrutiny.