As the deadline for filing taxes draws near, carriers and truckers alike are noticing big changes. Express Freight Finance has put together an overview of the changes, to help give insight and clear up some of the confusion when filing taxes this year.
The Per Diem Allowance
Tax reform resulted in a number of big changes, and the per diem allowance was one of them. Employee truck drivers who receive W-2 statements from their employers have had the per diem allowance eliminated. However, owner-operators still have the ability to deduct the per diem rate of $66 per day.
Tax Brackets and Deductions
While the seven tax brackets for individuals are still in place, the rates for the lowest bracket are lower. The usual 28 percent tax rate for income between $153,000 and $233,350 dropped to 24 percent. At the same time, the limits on deductions for individual taxpayers nearly doubled from $12,700 to $24,000. On the business side of things, the tax rates also dropped, but only for C-corporations. This really has little to no impact on the trucking industry, as more trucking companies are organized as LLCs, S-corporations, or sole proprietorships. However, LLCs, and S-corporations can file for the new business income deduction, which allows taxpayers to write off 20 percent of their regular business income, excluding employee wages and capital gains.
Bonus Depreciation
If there is one major benefit from tax reform, it’s been the bonus depreciation rule. Going back to the 2018 tax year, trucking companies can fully deduct 100 percent of commercial vehicle and equipment purchases. Depreciation still scales, dropping to 80 percent of the purchase price after five years, and then it eventually reaches zero by 2026.
Business Loss Deductions
The business loss deduction used to be limited to 20 years. However, after the latest tax reform, a loss can be carried forward indefinitely. Additionally, losses cannot be carried back to offset taxable business income from previous years.
While the deadline for C-corporations to file taxes was last month, individuals, sole proprietorships, and single-member LLCs still have until April 15th to get their taxes in order.
