Per Diem..worth It In Today's Trucking World?

Was talking to a driver the other day who asked if I was on the per diem program and I told him that I was. He said I should get out of that as soon as possible.

I don't remember the whole conversation, but he was basically against the idea. I believe he said that he did per diem for awhile and one year ended up with like a $2000 tax bill at the end of the year.

This got me to thinking however, if you take per diem, does this mean you cannot itemize anything at the end of the year, or does it mean that you just can't itemize food and lodging expenses, but can still itemize any other expenses, such as tools and supplies for your truck?

Also, with per diem pay not showing up as gross income, this can affect things like how much you are able to borrow when applying for things like home loans and car loans.

Just wondering if there are more negative aspects to taking per diem than positive.

Thoughts?

The IRS allows 80% of $64.00 or something close to that, as a per diem allowance for every 24 hour period that you are working away from home. Call it $50.00 per day. If you are away for 300 days per year, that is $15,000 that is not taxable income! Is it worth it in "this day and age"? You tell me. Whether your Employer pays you part of your wages in per diem or you claim it at tax time, you are still entitled to the deduction. Talk to a Tax Professional for details particular to your own situation.

The IRS allows 80% of $64.00 or something close to that, as a per diem allowance for every 24 hour period that you are working away from home. Call it $50.00 per day. If you are away for 300 days per year, that is $15,000 that is not taxable income! Is it worth it in "this day and age"? You tell me. Whether your Employer pays you part of your wages in per diem or you claim it at tax time, you are still entitled to the deduction. Talk to a Tax Professional for details particular to your own situation.

There are two different concepts in play here.

1 - An employer paying part of your wages as "un-taxed income" (per diem).

2 - Taking the proper deduction on your taxes, in order to claim the per diem.

Depending on your exemptions and deductions (dependents, etc.) - you could conceivably get into a situation where you may OWE $$ at the end of the year, because of the un-taxed income of being paid on a per diem basis.

PER DIEM PAY IS NOT FREE MONEY, nor is it TAX FREE MONEY. It is UN TAXED INCOME (that is, withholding and FICA has NOT BEEN PAID by your employer to the IRS). It is STILL INCOME.

In order to claim Per Diem, you have to take the deduction on your tax return - and you will most likely (90% or more) have to ITEMIZE in order to recover the FULL ALLOWABLE AMOUNT.

You can (and obviously should) claim the per diem deduction, and you can do so EVEN IF YOU AREN'T PAID ON A PER DIEM BASIS. And this is where some folks get confused.

Getting PAID per diem and taking the DEDUCTION are two non-exclusive things.

Keep in mind, there are many other expenses that are deductible (phone, internet, work/safety clothes, CB radio, etc.). Keeping your receipts and tracking your expenditures can net you a larger refund and/or minimize $$ you have to lay out when you file.

Be sure to also keep any paperwork (logs, pay stubs that show days out, etc) to prove the days spent OTR. This is important for folks that file STATE TAXES ALSO - as the states tend to scrutinize these deductions even more than the IRS.

Rick

I started per diem in January this year. Ask me how it went next April.

Thanks. See this is where I'm wondering if the per diem is right for me. I'll have to call a tax professional to find out.

Being that I have no wife or kids, and do not have normal deductions that most families have throughout the year, I always take the standard deduction each year.

This makes m wonder if at the end of the year, i may end up owing because my per diem through the year ends up being higher that what the maximum allowable per diem or deductions are allowed. In other words, if the untaxed amount for per diem means I ended up paying less in taxes than I should have, for the amount of income I made, in which I would end up having to pay that back.

One thing to consider if your company pays you per diem how much are they charging you to administrate your per diem?

2cpm

One thing to consider if your company pays you per diem how much are they charging you to administrate your per diem?

Never honestly understood why, when the driver is DOING THE COMPANY A FAVOR by taking per diem - that the company CHARGES THEM FOR IT.

The COMPANY is the one that makes out here - by not having the contribute their 7.5% share (in the form of ss/med taxes). Why they would charge the driver for that privilege is really questionable.

Personally - for the few extra $$'s would net by taking per diem - I'd much rather get the $$ back at the end of the year (much as I loath letting the IRS hold my money for me).

Rick

Definitely check with a tax PROFESSIONAL. I'm on the per diem (over 17 months) and it works fine for me. I considered going off of it, but the CPA who does my taxes says FOR ME, it's better to stay on it.

For borrowing purposes; I've been told to switch to traditional pay about 3-4 months prior to applying for a loan. That gives you pay history needed for the Lender.

Also, keep in mind that less (if you're on per diem) is being put into social security. Also (if your employer does 401k matching) your company retirement savings will likely be less than under traditional pay. So you might wanna put some of your pay into a "self-directed" retirement savings like an Individual Retirement Account (IRA). I hope this helps.

Everyone's situation is different and I do not feel anyone should make a recommendation to someone else. It's fine to point out the pros and cons, but unless you know whether the person made a lot of money the previous 35 years of emloyment ( for social security purposes), whether they take the standard deduction or itemize, etc... you are doing folks a disservice by making a recomendation.

I will not use per diem. My company lowers cpm by .01, but that is not the reason I choose not to do it. I own property and itemize my taxes. I also have other pre tax deductions that I take. My tax bracket is not going to change by taking per diem.

I have no idea whether someone else should do it or not.