Overdrive

February 2018

Overdrive Magazine | Trucking Business News & Owner Operator Info

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PULSE February 2018 | Overdrive | 5 There may have been times where you've considered ditching all the self-employment hassles of being an owner-operator and returning to the ranks of company drivers. Under the new tax reform package, you can be glad you persevered. Typical owner-operators should save $2,000 or more annually on taxes and will have basi- cally no change in their per diem deductions. Typical company drivers will pay more unless their compensation is structured in a way that effectively preserves the per diem benefit. These and other implications of the tax overhaul passed at yearend are from inter- views conducted by me and News Editor James Jaillet. We spoke with Todd Amen and others at owner-operator financial services provider ATBS, and Kevin Rutherford, for- mer trucker and owner-operator accountant, now a popular trucking satellite radio host. The tax break for owner-operators is due to slight reductions in tax rates and a new 20 percent deduction on net profits of "pass- through entities." Those are small businesses, including virtually all owner-operators, where profits pass through to the owner and are taxed at the owner's individual rate. That means you'll be taxed on only 80 per- cent of your net income. The change begins with the 2018 tax year. "The more you make, the more you save," says Rutherford. "At $100,000 net profit, the net savings in 2018 over 2017 is about $7,000." Company drivers miss out on that 20 per- cent deduction. Also, their tax bill could go up about $600 if they don't effectively recoup the lost per diem benefit, which they can no longer can deduct on Schedule A, individuals' primary income tax form. Owner-operators deduct per diem as a business expense on Schedule C. Many company drivers will be able to retain the per diem's benefit if their carrier will shave 10 cents per mile off their base pay and pay it to them as a non-taxable per diem reimbursement. A driver considering that change should consult with his accountant since his employer will be paying less employment tax, ultimately reducing Social Security benefits, which are based on the average of your highest 35 years of earnings. Another change Amen says his owner-operator clients are keenly interested in is Obamacare. Unfortunately, owner-operators who continue to go without health coverage will face penalties for the 2018 tax year, payable in April 2019. About 40 percent of ATBS clients have declined to get coverage in recent years and have been paying the penalty, which now has topped out between $695 and $2,000. See Jaillet's story on page 24 that explains how the tax law mostly improves equipment depreciation for owner-operators. A lower tax bill mheine@randallreilly.com By Max Heine Editorial director In addition to having 20 percent of net income shielded from federal tax, owner-operators retain the per diem deductions for meals while working away from home. Via OverdriveOnline.com: Bruce Graham: I sold my truck and trailer in mid-De- cember. I had my name on the door for 33 years. I run legal, but the ELD thing was the last straw. I don't need a government babysitter. ... As for me, it's week No. 5 of retirement, and I have never been happier, now stress-free. Chip: I am a heavy hauler, and I refuse to install ELDs in my trucks. I have so many restrictions now with state and city curfews, permits and operating time, it's already a problem finding a place to park a 200,000-lb.-plus load, as we spend most of our days on two-lane roads, and we have to be off the road at sun- set. The truck stops are full, and we are not allowed to use the off-ramps. I'm just going to say no, and everybody should just say no. They can't shut us all down. "Semi-retired": I have spo- ken with many owner-opera- tors, independents and com- pany drivers alike. It seems the short-haul and regional drivers have less to complain about. Long-haul – a general dislike, and understandable. There must be some flexi- bility with the 14-hour rule. This is currently being looked into and tested by the DOT [via the split-sleeper pilot pro- gram; search "split sleeper" at OverdriveOnline.com]. to starting a crisis." Nowak says that while she's committed to her decision, "If they change the hours of ser- vice, then we'll talk. I haven't given up on trucking, but right now, it's the right thing to do."

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