Tips for Maximizing Your Tax Deductions

8571667_mProbably one of the most procrastinated chores in human history, filing your taxes can be less painful if you’re paying less. And the best way to pay less tax legally is by maximizing your deductions. Below are some ways to make sure you’re getting as much as possible of your money back from Uncle Sam.

Save All Your Receipts – A lot of drivers mistakenly assume they don’t spend enough to itemize and deduct their expenses, but it’s easy to forget all the things necessary to live on the road and maintain a truck. Try keeping all your receipts for a week and see what you’re shelling out.

In the trucking industry, drivers can claim expenses for fuel, repairs, supplies and maintenance, meals and daily living expenses on the road, mobile phones and computers (that are 100% business use), tolls and other fees, depreciation and contributions to a retirement account. Mileage is another key deduction. For 2013, the IRS is granting 56 ½ cents a mile for business use of your vehicle.

XRSCorp.com offers a good overview of each of these to help you better understand what expenses may qualify as deductions.

Itemize Your Expenses – Taking the standard deduction is easier, but you can save a ton if you itemize. The 2013 standard deduction is $6,100 for singles and $12,200 for married couples filing jointly, and if your qualified expenses exceed those levels, it’s definitely worth the trouble to itemize. If you’re self-employed, own a home or live in a high-tax area, your qualified expenses you can reach those levels pretty fast.

Calculate Your Per Diem – There are two ways to take the per diem:

1) Save your receipts and itemize. You can deduct 80% of your total expenses.
2) Track the number of full days and partial days you’re on the road. You can deduct 80% of the IRS’s government’s per diem rate of $59.00 per day for each full day (in Canada, it’s $65.00), and $35.40 for each partial day. (The IRS doesn’t consider 20-hour day where you still sleep at home to be a full day. You’ll have count that as partial.)

If you haven’t done a great job retaining and organizing your receipts, you want option two, but if you think you’re spending more than $59.00 per day on expenses, make a commitment to yourself to get a better system in place for keeping your receipts in 2014.

If you’re a company driver, you can only take deductions for expenses required by your employer that aren’t reimbursed by your employer.

TeamRunSmart.com has a more in-depth explanation of exactly how to calculate what you can claim for your per diem. Also see Owner-Operators Independent Drivers Association’s (OOIDA’s) website for per diem explanation for company drivers.

Maximize Your IRA Contribution Up ‘Til Apr. 15 – If you’re under the age of 50, you can deduct all contributions to a qualifying IRA or Roth IRA up to $5,000. If your 50 or older, $6,500 is deductible. You have until the filing deadline of April 15, 2014 to make contributions for the 2013 tax year.

Figure Out If Your Capital Losses Can Offset Your Gains – It’s too late to improve the picture for 2013, but bear in mind for 2014 that capital gains and losses on business property can affect your tax picture []. Deb Tibbitts, Senior Accountant at ATBS, explains what to look out for. Toward the end the year, it might make sense to delay selling something – whether that’s a truck or a stock – if it’s going to bump you into a higher tax bracket.

Similarly, Howard at PBS Tax points out that with stocks at record highs, beware that taking any gains can come back to bite you when you file for 2014. Also, it’s a good idea to take a look at your investments in general, and if one stock has become too large a percentage of your portfolio, consider selling some of it. More of Howard’s tax tips are on OOIDA’s site. And he even offers his phone number to any driver with tax questions: (800) 697-5153.

Questions?

Good online sources for answers to your tax questions:

H&R Block’s Tax Institute
TurboTax

And you can download Your Federal Income Tax (2013) (Publication 17), the IRS’s general guide for individual taxpayers.

Just in Case April 15 Comes Up Too Fast

Download an IRS extension form http://www.irs.gov/uac/Extension-of-Time-To-File-Your-Tax-Return from their website, but don’t forget an extension on filing doesn’t mean you get more time to pay your tax. You’ll still need to estimate what you expect to owe and pay when you file for the extension.

Be Ready for Next Year

Get a jump on 2014 with these tax planning tips for truckers.

 

Please note: This article is just a guide for deductions you may be able to take. Be sure to consult a tax preparer for deductions you’re actually eligible to take.

 

ObamaCare and You: More Fun with Regulations

10190385_mIf you’re not sure what the Affordable Care Act (ACA or ObamaCare) means for you, you’re not alone. You may be unsure if your employer’s insurance company will renew your policy, cancel it or increase your premium. If you’re self-insured, you may be trying to make sense of what’s available. Will you be eligible for a subsidy or subject to a penalty? Is it better to stay on a spouse’s policy or get individual coverage?

Holly and David McCombs are looking at their situation and trying to determine which path for covering their family’s health expenses will be least painful. The wife of Maryland-based owner-operator, David McCombs, Holly works for Campbell Insurance Services, a broker licensed to the health exchanges in Maryland, Virginia, D.C. and West Virginia.

Currently the couple pays $1,053 per month for a plan to cover their family of four. Holly says a similar, ACA-qualified plan on the state-run exchange would be $400 more. “I’m going to keep what I have,” she says, “but I hear rumors the insurance companies will jack up grandfathered-plan rates big-time. They won’t be getting new healthy people in those plans.”

Michigan-based owner-operator Michael Wright and his wife are dealing with a few more question marks than the McCombs. After hearing the rates on his wife’s employer’s plan, which has covered their family for 25 years, could be going up 130% in 2014, he began investigating his options for ACA coverage on his home-state’s exchange. After providing information about age and place of residence, the system estimated the Wrights’ monthly premiums to range anywhere from $721-$1,634 for the “gold” level plans.

As you take on the task of sifting through your own options, here are some resources we’ve found that should help make some sense of the new law and present some options you might not be aware of:

Calculators

Overdrive magazine’s Todd Dills’ lists a couple of things to remember as you’re utilizing the estimating calculators below:

1) Your “income” figures will be based on 1040 modified adjusted gross income, estimated for 2014, not gross income.

2) The household-size and access-to-employer-based-insurance questions with calculators are all meant to take into account the entire household, not just the individual business. Owner-operators’ access to tax credits will be dependent on not only their own income but that of the entire household — if employer-based coverage is available and meets the affordability guidelines of the ACA, then credits will not be available. However, according to Ballard’s estimates, a majority, of owner-operators will likely fall into adjusted-income levels at which subsidies will be available.