The Business of Trucking
Clearing up confusion over per diem expenses
There seems to be a lot of confusion these days about per diem. Per diem, which basically means “per day,” is a method used to take a tax deduction for meals when traveling for business away from home. Like any other tax deduction, you could keep your meal receipts and add them up to get your deduction.
The IRS has decided to make it easy on you to deduct per diem expenses. Instead of keeping all of that messy paperwork, the IRS has created a per day amount that we can use without having any receipts. But hold on; this is still the IRS, so first they make it simple, and then they turn around and complicate it. Whether you choose to use your actual receipts or the per diem amount, you don’t get to take a deduction for the entire amount. You only get to claim a percentage of the amount, and that is where the problems start.
There is one set of rules for most people and a special set of rules for people subject to hours of service. The good news for most of the people reading this now is that the rules are much better if you are subject to hours of service and keep a log book. The bad news is that most of your local tax preparers and big tax firms don’t understand how those rules work for you, the driver, and because of that you could end up paying more taxes.
Here’s how to calculate per diem: Take the number of days you were traveling away from home and multiply it by the per diem rate for that time period. For example, last year’s per diem rate was $52 per day, so if you were gone 250 days, multiply that by $52 and get $13,000. For the 2006 tax year, you only get credit on your tax return for 75% of that amount, so your actual tax deduction becomes 75% of $13,000, or $9,750.
I’m not trying to teach you how to do a tax return; I just want to give you enough information to know if your tax preparer is doing it right. The only number you should have to supply is the number of days you spent traveling away from home. They should calculate the rest. Remember, always consult a tax professional for your situation, be safe, be profitable and master the journey.