Per Diem Pay For Truck Drivers?

Actually, I have a degree in accounting, and I worked for the IRS. I don't know a lot about taxes for trucking, but I am familiar with per diem. I can't think of reason how per diem would increase ones tax liability.

but you'd have to itemize every single thing if you wanted it to be worth it, am I right?

The best thing to do is take the standard deduction for meals which (oddly enough) tends to change a little each year. It's normally like $56 per day or something like that. But the standard deduction for meals will far exceed what you would have really spent on meals, thus preventing the need to itemize for that.

Things like tools and clothing and electronics you need to do the job would all be itemized.

I'm not sure what you would have to do as far as itemizing things if you've taken per diem. I'm not sure what you'd have to do in that case.

Oh ok thanks Brett. Hmmm. Kinda seems like itemizing and taking the standard meal deduction might actually get you more money back in the end. But you'll have to wait all year for it--that's the catch.

This is a rough estimate, but I figure around 25% for taxes each paycheck. If Swift takes 10 cents per mile away, they're really taking about 7.5 CPM after taxes. Then they add 8.5 CPM that is nontaxable. That's only a 1 CPM increase. If I run 10,000 miles per month, I'm only taking home an extra $100 per month after taxes. If the standard meal deduction is like $50 per day, that obviously adds up to more than that, but you're getting it back at the end of the year in a refund.

This is obviously a very rough estimate, but is this in the right ballpark for how much my net income might vary with per diem? Or am I 100% misunderstanding how taxes, deductions, and per diem works?

This isn't a "receipt" thing. P.D. or no P.D. will show on your W-2. You always have your current and year-to-date totals on your paycheck stubs which are emailed to you.

Don't let other people make every big decision for you. You are the only expert on "Mr T".

Hint: in my thinking, if you do not plan/ expect to itemize deductions, P.D. does this part for you.

This is True I guess it is my decision ultimately. & not sure if it's "True" or not but I ready something online that said the standard per Diem pay in trucking was $63 a day in 2015. Don't know if it's changed or not. But also thanks for the hint! I suppose worse case if I select to try per Diem then when tax time rolls around if it's any drastic changes or I owe a lot of money I just know to change it back. No harm done.

I've written extensively on other threads, regarding the tax ramifications of per diem.

Here's a few bullet points to keep in mind.

1 - It is not TAX FREE - it is UN-TAXED INCOME.

2 - If the amount (total) of per diem paid, EXCEEDS the "standard deduction amount" (which it usually does), you WILL HAVE TO ITEMIZE. While it is time-consuming, the combination of PD and other allowable/deductible expenses, makes it worthwhile to itemize.

3 - You do not need to keep receipts for "PD allowed expenses" (they can be lumped in at the daily rate), but you SHOULD keep receipts for other allowed expenses/deductions (just in case).

4 - You DO WANT TO KEEP DOCUMENTATION of your "days on the road" (FULL DAYS) is this is the "multiplier" used to figure your PD deduction.

5 - You DO NEED TO (technically) have a "home", as PD is to cover normal expenses for "days away from home". So if you're the guy that doesn't maintain a "homestead" - then (technically), you can't take the PD deduction.

6 - You CAN TAKE the PD deduction - EVEN IF YOU ARE NOT PAID ON A PER DIEM BASIS. Again - this saves you from having to keep receipts for allowed PD expenses (by taking the standard rate deduction X days OTR). You will end up getting a LARGER REFUND - because the same amount of "untaxed income" will be deducted from your adjusted gross income (and taxable income) - but not being paid PD means that you will have PAID IN WITHHOLDING on that amount (and be due a refund).

A lot of people don't want the grubbermint to be "holding onto" their $$ in the form of withholding taxes, only to get it back (without interest) when the file their taxes.

PD saves the COMPANY MONEY - as it is "untaxed income", they don't need to "match funds" on the SS deductions. SS is typically 15% (up to the annual max), but for a W-2 employee - the employee pays 7.5, and the company pays the other 7.5%. This also means your SS retirement funds are going to be LESS THAN, if you were not paid on a PD basis.

This makes less of a difference if you are YOUNG, but those of us older folks - our SS payments are based on the LAST 40 QUARTERS WORKED (10 years) - so folks getting into this in their 50's and planning on retiring out of trucking for a decade - may want to consider making higher SS deductions (by not taking PD), and getting a larger SS payout when they hit retirement age (going on the delusion that it will actually BE THERE in another decade).

So in a nutshell - PD is not FREE MONEY - it is UNTAXED INCOME. It's STILL INCOME - you just haven't paid the taxes on it. Unless you document properly and take the deduction properly (which in most cases will require ITEMIZED DEDUCTIONS in order to realize the full amount), then there is no advantage to it.

Personally - I would opt to NOT TAKE IT - and take the deduction (resulting in a larger refund and more $$ paid into SS).

YMMV...

Rick

Speaking of taxes...is there a good place that lists things that are tax deductible for truck drivers?

Depending on your state of residence You might need to keep receipts for all expenses. PA for example doesn't have any kind of per diem and if you want to claim anything then you have to have receipts for it. I got screwed over last year because I didn't know this so I didn't have any receipts to show them when they asked for them.

I am going to disagree with Rick about Social Security. Anyone who is depending on it to get them from retirement to death, is going to be in for a bad reality check one day. It would be best to make as much bring home now as and put it into a Roth IRA. Just my opinion.

Another thing about companies taking out the per diem for you is that they also take out a penny for themselves as a "processing" fee. For an individual it doesn't seem like much but for an entire fleet of drivers it adds up to money that they're taking away from you. Not to mention, I've always been curious about the supposed processing, the computer does it automatically so it's not like there's someone sitting there having to figure it out. I know someone will say that the software costs money etc but that's part of the cost of doing business and they regain it from their employees? Sorry but that seems wrong to me.

Just my $.02

they also take out a penny for themselves as a "processing" fee.

If so, there would be a deduction on your pay stub. Which there isn't. Every penny of your earnings must be accounted for on the stub.

You might be worried about rounded numbers, but there no "processing" fee. Your company is already coming out ahead (yeah, for all those hundreds of drivers) in reduced expenses in Social Security contributions and such.

No, I actually remember orientation at Knight where they specifically told us there was a processing fee for per diem. It was at that point, I signed the form refusing it and filed it on my own.