2023 has been an unusual year for truck drivers‘. Whether it has hit you beneath the belt or has worked in your favor for your wallet, how you handle your 2023 tax is bound to make a major difference, one way or the other.
Most of the truck drivers don’t realize the benefits that are available to them or they have a perception that it’s too complicated and, also, consider that taking advantage of them is not worth the effort at all. However, that is not the case truly.
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How the 179 Tax Code Works
The only goal at tax sessions, for those in the trucking industry, is always to reduce Taxable Gross Income since taxes are paid on Adjusted Taxable Income which is your income after getting done with all the qualified deductions.
Truck drivers, like other small business owners, are eligible for deductions and incentives that are set into place for them through Section 179, also known as the IRS 179 Tax Code. There are a handful of tax codes that allow business owners to disregard business expenses, Section 179 is the best one for optimizing deductions and maximizing incentives.
Opposing to common belief, Section 179 is relatively simple to follow and worth all the time and making the effort to do so.
Section 179 of the IRS Tax Code allows business owners, including truck drivers, to take off the entire price of the purchase of qualifying equipment that is bought or financed during the current tax year.
For instance, you can buy, or even lease, a Commercial Truck and turn around and deduct the full price tag from your Gross Income.That means you fulfill the goal of reducing your Taxable Income and get a Commercial Truck in the process. It’s a win-win situation indeed!What’s the con in this? Well, there isn’t one.
The incentive was introduced by the United States Government in order to encourage business owners to invest in their work and to buy equipment, thus fueling the economy.
How to legally declare your losses?
Sometimes it’s not all about making money. You also have to learn in life how to lose money. But you must learn how to lose money legally. So, let’s delve deep into declaring losses Legally as we come to a closing of a disastrous year for the trucking industry. We’re gonna need to know how to declare losses and take advantage of the trucker tax codes that we have out there.
Irrespective if you’re an owner operator or a small fleet owner or planning of getting into being an owner operator – you’re gonna run into a year. That’s not good just like 2023 and you’re gonna need this information to help you declare losses in the future.
So the points to considered are as follows:
i) Caring forward losses
If you have a corporation and you made Minus $50,000. The great thing about corporations is that you get to carry it forward from year to year.
So let’s say you made minus $50,000 this year and next year you made plus $50,000. Well, you’re not paying any taxes this year or next year. You get to carry it forward year over year in a corporation.
ii) Carry back Options
For example in 2022, you made a hundred thousand dollars and you paid the taxes on the hundred thousand dollars and then in 2023, you lost $50,000 you can actually claim back the taxes that you paid last year to help you out this year. How amazing is that?
2022 was a good year. Which resulted in decent profit for most of them in the trucking business and now in 2023 you’re coming out with a loss. Well, guess what you can claim back the taxes that you paid last year on the income that you paid.
iii) Flexibility with losses
For example, if you have a real estate portfolio or if you have stock portfolio and you have a trucking portfolio, you as an owner operator lost $50,000 in trucking in 2023 but you made a lot of money in stocks and real estate.Well, you can offset the losses and pluses within corporations.
So, it’s a very, very powerful tool that you’re diversifying and that you’re doing multiple things because sometimes, you know, trucking will be really profitable and sometimes it’s not going to be so profitable. So you make sure you have other sources of income to offset those losses.
iv) Married: Joint Taxes
So if you are doing your joint taxes with your significant other, and you know, if trucking all of a sudden is really, really bad, but your spouse is doing really, really good within her corporation, you can also offset losses from corporation to corporation as long as you’re within the same household.
How amazing is that? And the same thing you can do vice versa the following year. If trucking is really good and whatever it is your spouse is doing is not so good or not so profitable, you can use the pluses and minuses to offset one another.
v) Change in Ownership
Whether it’s the same business or a different business, you can still use those losses for your new business. For instance, let’s say I came from the restaurant world, I opened up a restaurant, and I lost a lot of money in that restaurant. So let’s say I walked away with losing $350,000. Well now I can change the same corporation, okay, to get into trucking and then I can use those losses to move forward.
So let’s say that corporation has $300,000, okay Now the next year I made plus $100,000. Well, I just offset those losses with my pluses and now I have another $200,000 to carry forward. So the interesting thing is that even if it’s a corporation that has nothing to do with what you’re doing right now, or even if the structure of the ownership changes, you can still use those losses moving forward.
This is applicable to not just the small fleet owners, you can apply this to the owner operator that just has one truck. Or an owner operator that has two trucks.
Additional Information regarding Trucker Tax codes:
One thing you must consider is that you must take assistance from a tax accountant that specializes in trucking. Because these scenarios have to be geared towards your business. These scenarios all have to be geared towards trucking. And that’s we suggest you only work with people and professionals that specialize in trucking, owner operators, and small fleets.
If you are new to this business, you can use M7 taxes. Whatever your story is, whatever your situation is, always consider a second opinion and utilize and take advantage of these tax rules. There are options for all the business owners out there.
In conclusion, familiarity with key trucker tax codes is essential for financial efficiency and compliance. Navigating this tax regulatory section empowers truckers to optimize their finances, minimize liabilities, and drive their businesses toward long-term success on the open road.
I'm a HR at OpenFR8 and a passionate blogger. Apart from my day job as HR, reading and writing books/blogs are two of my absolute favorite things to do. I like taking on new challenges and most importantly, I believe in bringing efficiency towards everything I do. I love expressing my thoughts and visions through the medium of words in the form of blogs or articles or books. Till this date, I've successfully published three short-novels on my own and will continue to do so.