Per Diem Pay For Truck Drivers

I know what Per Diem is. My question is:

Tons of companies offer it. But since newbies don't really know how it works, which is better.

Is it better to take per diem if your company offers it, or stay away from it?

I myself, like a big tax refund every year. But I read somewhere that almost always a driver makes out if the do take per diem.

Also. What is the going rate for per diem?

Keep it safe out there. Joe S

First of all, in the end it's going to work out almost exactly the same. Even if you're charged a small fee of some sort for per diem , in the end it's going to be peanuts. I highly doubt there's going to be a difference of $1,500 per year. No way. So it basically boils down to whether or not you want to have smaller paychecks but a huge tax return or get more money in each paycheck and a tiny tax return. In the end it works out almost exactly the same.

The American fascination with a huge tax return is extremely poor financial planning. But it's not only about the big lump versus getting it now. You may be getting less OVERALL. Would you rather have $5,500 extra over 12 months paid each paycheck? Or $7000 extra over those same 12 months but paid in a lump sum at the end? $7,000 is always better than $5,500.

I take a slightly different approach to it. I think using your tax return as a savings account is an excellent idea. Not because it's the most efficient way on Earth of organizing your financial strategy, but because it's a highly effective way of saving money. Money that never enters your pocket or bank account is impossible to spend and most people find it very difficult to put money aside for savings once it's in their possession. Letting the government hold onto it for you and giving it all back once a year works incredibly well for a lot of people. Therefore I would say that using the tax system as a savings account is far better than not having a savings account at all which would be the reality for most people.

The obvious argument is "you don't make interest on your savings like you would if it was in a bank account." My reply is:

1) Most people wouldn't put nearly as much aside on their own so there wouldn't be much of anything to collect interest on anyhow

2) Are you really making enough money on interest in a savings or investment account for it to matter? No, not even close. You'd be lucky to make $20/year in interest on the money you're letting the government hang onto. Raindrops in an ocean.

So I think using the tax system for a savings account is highly effective for a lot of people so they should continue doing it.

I am not a tax professional but my fiance's good friend is a tax attorney for Ernst & Young. She is an expert in corporate tax law, accounting, and financing.

She told me that per diem is good for an employee up to a certain income level, because there is a maximum that can be claimed per diem per year. It also benefits the company because you are putting less into social security so they pay less payroll taxes; which in turn is negative for you when you go to claim your social security because you put less in. After the maximum cap has been hit it exclusively benefits the company. She said most companies push it so hard because it benefits them after the employee hits that maximum salary area, but at that point the employee is use to being on per diem and does not reevaluate his/her position. That is the average employee mindset for you.

She told me to avoid it, and I trust her opinion.

Per diem as defined by the tax code is Per diem (Latin for "per day" or "for each day") is a daily allowance for expenses—a specific amount of money an organization gives an individual per day to cover living expenses when traveling for work.

The reason the above is important I will get to in a minute........

Here is the main point of my post....anyone EVER went and applied for a home loan or a car loan? Lending companies ONLY take in account your EARNED income and you can see for yourself by the definition above Per Deim is not in the category of earned income.

Now for an example.....Let's Say YOU Grossed $63,000 a year just to keep the numbers simple and this example in no way reflects the maximum allowed claim per diem.

OK now let's say $13,000 was per deim. It's not EARNED income so can not be taken into account on a loan application cause per deim can and will change every year so leading companies will only calculate the number they know will stay roughly the same which is your true earned income which in this example will be $50,000 instead of the $63,000 you were so proud of at the end of the year.

Now those on this site that are business minded or have a business background can see how collecting per deim throughout the year can be bad but for the rest.......

Per deim can stop you from getting a much needed load because you can only show true earned incoming so your actual salary is alot less on paper and that is what banks and leading institutions are going to look at when they decide to turn down your loan cause $50,000 is not enough.

While per deim is definitely not a bad thing cause it does fill a purpose and in my opinion is better to take at the end of the year that way it's not show on your w2 form there by keeping an inflated number separate from your actual pay. May not seem like a big deal but if it's on paper it will be judged.

Well I tried to make what I was saying clear and hope it came across. Maybe someone can add to this and maybe make it simpler to understand.

Well, my question is still the same : why do trucking companies PAY per diem in the first place? Is it a regular thing or a rare, special circumstance thing? Again, I was under the impression that they simply paid a "per mile" fee. Does a significant portion (as in $13,000 out of a total of $63,000) come from per diem?? Thanks,

Stephen E. Birch

In short it's about the amount of taxes or less taxes a company has to pay the government for employment tax per employee. You get per deim any way you can get it the difference is how you claim it on your taxes. If a company pays you part of your pay with per deim that part is not taxed therefore lowering the companies tax liability cause they are not paying you a taxable income. And at the end of the year you can only claim what per deim that you did not get from the company. The company pays you less of a taxable wage. Yes it's perfectly legal. Nothing says a company can not include per deim as a way to off set living expenses while on the roa as a part of your pay as long as you are receiving your full pay for the work you are doing. Basically per deim is free money and as long as 6 ou get it from somewhere it does not matter how you get it. Weather as a tax break at the end of the year or to off set living expenses during the year. As long as its claimed correctly on your tax form then it's all good.

It can benefit the driver also. Less taxable wage the less taxes you pay as a driver and now the vicious cycle starts. Less table wage less taxes you pay the less taxes you pay on income the less you can claim as earned income and the less you have to show a leading company means a lower loan.

why do trucking companies PAY per diem in the first place? Is it a regular thing or a rare, special circumstance thing?

Since truckers get a lot of tax write-offs each year they give you a choice. You can either:

1) Get some of your income tax-free each week (getting per diem). This way you'll take home more money in each paycheck but you'll get a smaller tax return at the end of the year.

2) Get none of your income tax free each week. This way you'll take home less in each paycheck but get a huge tax return at the end of the year.

In the end it makes no difference really. You make the same amount of money. The only difference is in how they distribute it to you. They either take out the full amount of taxes and you'll get a huge tax return or they take out fewer taxes and you get a smaller tax return.

I am not a tax professional but my fiance's good friend is a tax attorney for Ernst & Young. She is an expert in corporate tax law, accounting, and financing.

She told me that per diem is good for an employee up to a certain income level, because there is a maximum that can be claimed per diem per year. It also benefits the company because you are putting less into social security so they pay less payroll taxes; which in turn is negative for you when you go to claim your social security because you put less in. After the maximum cap has been hit it exclusively benefits the company. She said most companies push it so hard because it benefits them after the employee hits that maximum salary area, but at that point the employee is use to being on per diem and does not reevaluate his/her position. That is the average employee mindset for you.

She told me to avoid it, and I trust her opinion.

Thanks ThinksTooMuch.

From what little I can find on the internet about it, it says in the long run it can hurt the person. Which sides up with what you wrote.

Keep it safe out there. Joe S

Some companies dont give you an option.

Some companies dont give you an option.

For both sides. Some companies FORCE per diem on you... some don't offer per diem. Always benefits to ask, whichever one you prefer to have maybe they will indulge you heh.

I was never asked if I wanted per diem or not. But come on, so far it added 5,500 to my annual salary in 9 months of driving.I'm not complaining at all! I don't really understand what it is but I'm not sure if I care. If it adds a few extra hundred dollars to my paycheck ill love it no matter what. It basically elimites the taxes from the paycheck.

Daniel, I would talk to a tax professional if I were you. This is exactly what companies want; you just take it and don't really investigate further. It may be a benefit to you, or it may not. You need to speak to a professional. It's not only trucking companies, many, many companies offer some form of per diem.

Daniel, I would talk to a tax professional if I were you. This is exactly what companies want; you just take it and don't really investigate further. It may be a benefit to you, or it may not. You need to speak to a professional. It's not only trucking companies, many, many companies offer some form of per diem.

I don't really care for tax return. I'd rather get a bit more money steadily than in one large amount.

If I get it like I am now then the money goes to bills. If I don't get it like I am now but will get 3,000 on my tax return then the wife will spend it on useless things. It's all about doing things to counteract her shopping haha!

I'm kinda joking but mostly not. It's fine to go shopping with a few hundred dollars but if she gets ahold of a few grand it could get bad.

That is the right attitude. The American fascination with a huge tax return is extremely poor financial planning. But it's not only about the big lump versus getting it now. You may be getting less OVERALL. Would you rather have $5,500 extra over 12 months paid each paycheck? Or $7000 extra over those same 12 months but paid in a lump sum at the end? $7,000 is always better than $5,500.

You also can counteract the "lump sum" approach by adjusting your withholding. Again... talk to a professional, it's worth the time. And not just you Daniel, but everyone.

First of all, in the end it's going to work out almost exactly the same. Even if you're charged a small fee of some sort for per diem , in the end it's going to be peanuts. I highly doubt there's going to be a difference of $1,500 per year. No way. So it basically boils down to whether or not you want to have smaller paychecks but a huge tax return or get more money in each paycheck and a tiny tax return. In the end it works out almost exactly the same.

The American fascination with a huge tax return is extremely poor financial planning. But it's not only about the big lump versus getting it now. You may be getting less OVERALL. Would you rather have $5,500 extra over 12 months paid each paycheck? Or $7000 extra over those same 12 months but paid in a lump sum at the end? $7,000 is always better than $5,500.

I take a slightly different approach to it. I think using your tax return as a savings account is an excellent idea. Not because it's the most efficient way on Earth of organizing your financial strategy, but because it's a highly effective way of saving money. Money that never enters your pocket or bank account is impossible to spend and most people find it very difficult to put money aside for savings once it's in their possession. Letting the government hold onto it for you and giving it all back once a year works incredibly well for a lot of people. Therefore I would say that using the tax system as a savings account is far better than not having a savings account at all which would be the reality for most people.

The obvious argument is "you don't make interest on your savings like you would if it was in a bank account." My reply is:

1) Most people wouldn't put nearly as much aside on their own so there wouldn't be much of anything to collect interest on anyhow

2) Are you really making enough money on interest in a savings or investment account for it to matter? No, not even close. You'd be lucky to make $20/year in interest on the money you're letting the government hang onto. Raindrops in an ocean.

So I think using the tax system for a savings account is highly effective for a lot of people so they should continue doing it.