Everybody hates taxes. But if you’re a trucker, you’ve got some tax-saving opportunities other small-business owners don’t.
Small-Business Entity Selection
As a trucker, one of your first opportunities is your business entity election. When you file your first tax return, you can file as either a sole proprietorship or a single member limited liability company (LLC), which is taxed as a sole proprietorship but carries additional benefits.
Schedule a no-obligation consultation with a small-business tax expert from 1-800Accountant.
Individuals who are just starting their trucking small businesses and are looking to take advantage of as many benefits in the tax code as they can typically form LLCs.
You may have also thought of setting your small business up as an S-Corporation. That could be advantageous if the business has a profit of at least $40,000 or more and you plan to receive a salary from the business.
In that case, you can make the election to be an S-corp when you file your first tax return by filing form 2553. This is referred to as a “late election” because you will be filing for the election more than 75 days after you originally organized your business and filed with your state.
Tax Planning Opportunities
Once your business starts generating a profit, 20% of your business income will be eligible for a deduction so you will only be taxed on 80% of your profit.
However, you still want to be aware of tax planning opportunities.
Depreciation Write Off on Your Truck
Your first purchase will likely be a truck. Due to new changes in the tax law, if the truck you purchase weighs more than 6,000 pounds, you can deduct 100% of the purchase price as depreciation in the year you purchase it.
Even if you just make a down payment and finance the rest of the truck purchase, you can write off the full purchase price as depreciation.
As a result, you may find that you generate a tax loss in the first year of your small business operation, even if your gross income exceeds the operating expenses. If you have set up your small business as an LLC, you can use the loss to reduce any other personal income you have.
Writing Off Your Trucking Expenses
Your other truck expenses, such as gas, insurance, repairs, etc., are also deductible. You want to keep receipts for these expenses because you will be using the “actual expense” method for deducting expenses.
Health Insurance Deductions
As a business owner, if you have your health insurance paid by the company and you receive a salary, you may be able to deduct the health premiums on your personal tax return.
Deducting Retirement Contributions
Perhaps the largest deduction available to business owners is contributions to retirement plans, like 401(k)s, SEP, or SIMPLE.
You may also be eligible for a home office deduction if that is where you do some of your business work.
A plan to review tax strategies as your business gets started is a good way to increase the bottom line.
