As a truck driver, you're not only responsible for safely delivering goods; you're also responsible for managing your own expenses while doing so. You’ve probably heard about trucker per diem, the IRS program to help truckers recoup the costs of food and other incidentals while on the road, but are you making the most of it?
Per diem isn't just a financial perk; it's a strategic advantage that can empower you to manage your expenses more effectively while on the road. Let’s talk about what trucker per diem is, how it works, and how you can maximize its benefits.
What is Trucker Per Diem?
Derived from Latin, “per diem” literally means "per day." In the context of trucking, per diem refers to the daily monetary allowance drivers have to cover expenses like meals, lodging, and incidentals (such as laundry or tips) when away from home. Utilizing trucker per diem is a way to ease the financial burden of being on the road for extended periods of time.
Per diem works slightly differently for company drivers and owner operators. For company drivers, per diem pay is 80% non-taxable money that is paid to you by your company to cover your meals and expenses while you’re on the road and away from home. As self-employed independent contractors, owner operators are eligible to deduct per diems on their tax returns.
Do you qualify?
To qualify for trucker per diem, you need to meet the IRS criteria (for owner operators) or company criteria (for company driver), which is typically being away from your tax home for a certain number of hours or days.
If you are a company driver, your ability to qualify will also depend on whether or not your employer offers the program; but more on that in the next section.
What are the rates?
As self-employed independent contractors, owner operators follow the rates set by the IRS for 2023: $69 per full day and $51.75 per partial day.
Company drivers per diem amounts can vary depending on factors such as company policy and government regulations. In the past, company drivers were able to claim per diems on their tax returns similar to owner operators. But due to the Tax Cuts and Jobs Act passed in 2017, company driver per diems are now only able to be offered through a driver’s employer.
At K&J, we currently offer company drivers a $60 per diem benefit for a full dispatched day.
What are the tax implications?
One of the most significant advantages of per diem is its tax benefits. The Taxpayer Certainty and Disaster Relief Act of 2020 temporarily allowed a 100% deduction on per diem during 2021 and 2022. But starting in 2023, the deduction has gone back to 80%.
For owner operators, per diem deductions are taken on your year-end tax returns. At the 80% deduction rate, a full-day per diem deductible amount is $55.20 and a partial day per diem deductible amount is $41.40.
While all companies handle per diems for company drivers differently, at K&J it is taken out of your paycheck pre-tax—meaning you get more take-home pay because fewer taxes are withheld—and we cover the 20% tax liability.
Remember: for both company driver and owner operators, utilizing per diems lowers your overall verifiable gross income - which can be great for tax returns, but a detriment when it comes to credit checks for things like loans, credit, and mortgages. In the long run, per diem pay could also decrease retirement benefits, such as Social Security and Medicare, since you have paid in less due to lower gross pay.
How to Maximize Per Diem Benefits
1. Keep Accurate Records
For owner operators, it’s essential to maintain meticulous records of your travel dates, locations, and expenses to ensure you receive the full per diem benefit. This documentation will be crucial during tax season.
Although company drivers will not have to submit receipts or request reimbursement for expenses covered by per diem, it’s always a good idea to be frugal, as your company will typically not provide additional reimbursement in excess of the per diem rate.
2. Understand Company Policies
If you are a company driver, familiarize yourself with your company's per diem policy. Some companies might offer an automatic flat rate dedication from your paycheck, some might provide a credit card before your trip or add a per-mile rate to your regular take-home pay.
3. Consult a Tax Professional
Tax regulations can be complex, and they vary by jurisdiction. Seeking advice from a tax professional who is well-versed in trucking-related tax matters can help you navigate the tax implications of per diem accurately.
4. Utilize Technology
Numerous apps and tools are designed to help truckers track expenses and manage receipts. Leveraging these technologies can simplify record-keeping and expense management.
per diem is a strategic advantage
Trucker per diem is a valuable benefit that can significantly impact a truck driver's financial well-being while on the road. By understanding the basics of per diem, staying informed about your company's policies, and keeping accurate records, you can make the most of this allowance. However, always remember that tax regulations can change, and seeking professional advice is crucial to ensure compliance and optimize your financial benefits.
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