Operating a trucking company involves significant expenses, but fortunately, the U.S. tax code provides numerous deductions and credits that can help reduce your overall tax burden. For 2024-2025, here are some key deductions and credits that trucking companies can utilize to maximize their savings and remain financially healthy.
Tax Deductions for Trucking Companies
1. Vehicle Expenses
The cost of purchasing and maintaining trucks is often one of the largest expenses for trucking companies.
- Depreciation: Trucks and trailers are depreciable assets. You can deduct their cost over time, typically using the Modified Accelerated Cost Recovery System (MACRS). For 2024-2025, bonus depreciation allows you to deduct 80% of the cost of eligible assets in the first year (down from 100% in prior years).
- Repairs and Maintenance: Routine repairs, oil changes, tire replacements, and other maintenance costs are fully deductible.
2. Fuel Costs
Fuel is another significant expense. While fuel prices fluctuate, all fuel costs incurred in operating your trucks are deductible. To claim this deduction, maintain detailed records of fuel purchases, including receipts.
3. Per Diem for Drivers
Drivers can claim a per diem deduction for meals and incidental expenses while traveling away from home for work. For 2024-2025, the IRS standard per diem rate for transportation workers remains at $69 per day for travel within the continental U.S. and $74 for international travel.
4. Insurance Premiums
The cost of insuring your trucks, cargo, and business operations is fully deductible. This includes:
- Liability insurance
- Cargo insurance
- Health insurance provided to employees
5. Lease and Loan Payments
- Lease Payments: If you lease your trucks or trailers, the monthly lease payments are deductible.
- Interest on Loans: Interest on loans used to purchase trucks or other business equipment is also deductible.
6. Employee Wages and Benefits
Wages paid to drivers, dispatchers, and other employees are fully deductible. Additionally, contributions to employee benefits, such as health insurance or retirement plans, can also be deducted.
7. Office and Administrative Expenses
- Office supplies, software, and equipment
- Rent or mortgage payments for office space
- Internet and phone services
- These expenses are fully deductible if used exclusively for business.
8. Licensing and Permits
Costs associated with obtaining and renewing commercial driver’s licenses (CDLs), Department of Transportation (DOT) registrations, and International Fuel Tax Agreement (IFTA) permits are deductible.
9. Association and Membership Fees
Membership dues to industry associations, such as the American Trucking Associations (ATA), are deductible as business expenses.
Tax Credits for Trucking Companies
1. Work Opportunity Tax Credit (WOTC)
Trucking companies that hire individuals from certain target groups, such as veterans or long-term unemployed individuals, may qualify for the WOTC. The credit can range from $2,400 to $9,600 per qualified employee, depending on the target group and hours worked.
2. Alternative Fuel Tax Credit
If your fleet uses alternative fuels like natural gas, propane, or biodiesel, you may qualify for a credit of $0.50 per gallon of fuel consumed. This credit has been extended into 2025 under recent legislation.
3. Employer Credit for Paid Family and Medical Leave
If you provide paid family or medical leave to employees, you may qualify for a tax credit equal to 12.5% to 25% of the wages paid during the leave period, depending on the percentage of wages paid.
4. Energy-Efficient Commercial Vehicle Incentives
For companies investing in electric or hybrid trucks, there may be federal and state tax credits available. For example:
- The Qualified Plug-In Electric Drive Motor Vehicle Credit provides up to $7,500 for eligible electric vehicles.
- State-specific credits or rebates may also apply.
5. COVID-19 Relief Programs
Although many COVID-19 tax relief programs have ended, businesses should check for any lingering credits or deferrals that may still apply to their operations in 2024-2025.
Record-Keeping Best Practices
To take full advantage of these deductions and credits, trucking companies must maintain accurate and organized records. Here are some tips:
- Use Accounting Software: Platforms like QuickBooks or specialized trucking software can simplify tracking expenses and income.
- Keep Receipts: Fuel, maintenance, meals, and other expenses require documentation to substantiate deductions.
- Log Mileage: Ensure drivers log their miles accurately, especially if claiming per diem or mileage-based deductions.
- Consult a Tax Professional: Tax laws are complex and subject to change. A CPA or tax advisor with experience in the trucking industry can help identify all eligible deductions and credits.
State-Specific Tax Benefits
Some states offer additional tax benefits to trucking companies, such as:
Fuel Tax Refunds: For off-road use of fuel, certain states allow partial refunds.
Sales Tax Exemptions: Some states exempt trucking equipment from sales tax.
Check with your state’s Department of Revenue or a tax professional to ensure you’re maximizing state-level benefits.
Conclusion
Tax deductions and credits are vital tools for trucking companies to reduce their tax liability and reinvest in their operations. By understanding and utilizing these benefits for 2024-2025, trucking companies can significantly lower their expenses and boost profitability.
If you’re looking for expert guidance on maximizing your deductions and credits, consult a tax professional familiar with the trucking industry. A proactive approach to tax planning can help your business stay financially healthy while navigating the road ahead.