With the Covid-19 pandemic subsiding, the government is in a continuous effort to raise back the economy through stimulus programs.
Notably, restaurants were heavily affected by the pandemic, and it’s only fair that the government gives them focus. And we can see that in the recent increment of per diem meal deductions from 80% to 100%. This will incentivize owner-operators to eat out more often because of the cost savings they’ll enjoy while increasing traffic and revenue for restaurants.
Although this new per diem change is temporary, only lasting from 2021 to 2022, it is a great way to save more on your meal expenses as an owner-operator truck driver. But all the same, most truck drivers are confused about how the per diem changes exactly apply to them, and rightly so.
What is the Cause of this Confusion in the Trucking Industry?
The reason owner-operators don’t really get how the 100% per diem deduction affects them isn’t far fetched. It’s simply because there are special per diem deduction laws that apply to owner-operators, but the new change is not codified in that same section that addresses them. Instead, it’s written in another section of the IRS code.
However, you have absolutely nothing to worry about as a truck driver. You have the full capacity to take advantage of this new per Diem deduction of 2021.
How Can Truck Drivers Benefit from the New Per Diem Deduction?
Notably, you move around a lot as an owner-operator, and most of your meals come from restaurants. With this new increase in per diem deduction, you can save more on your meals than ever before. This is how it works.
Let’s assume you are away from home throughout 2021 (365 days), and you got all your meals from restaurants. With the former per diem deduction of 80%, you’d only be able to save 365 x $66/day x 80% = $19,272 on your meals.
But with the new 100% deduction, you’d save 365 x $66/day x 100% = 24,090. That gives you a tax saving of almost $5,000 (24,090 – 19,272) more than what the former per diem offers.
A New Challenge
As simple and exciting as it may seem, it is, however, not so straightforward. That’s because you are not expected to get all your meals from restaurants. In a week as a truck driver away from home, you can get your food from convenience stores, restaurants, and hotels alike. It’s therefore not very easy to keep track of your meal expenses to know how to calculate your per diem deduction while including the new amount that affects only restaurants.
Knowing that this poses a huge challenge to owner-operators in the trucking industry, we’ve therefore put together a simple, effective method to track your meal expenses as approved by the IRS.
Tracking Per Diem Deduction Based on the Recent Changes
Have a record of the number of times you bought food from restaurants (including dine-in and take-out) and the number of times you patronized other sources like grocery stores. Then represent both figures as percentages.
For example, if you work away from home for 30 days and eat three times a day, that makes a total of 90 meals (30 x 3). If you bought 54 of those meals at restaurants, that makes 60% (54/90) of your total meal purchases.
In effect, the 100% deduction will only apply to this 60%. The remaining 40% of your meal purchases will be subject to the original 80% per diem deduction.
By adding up the two results (for the restaurants and non-restaurants), it gives you your total per diem deduction for the duration.
Keeping a record
Maintaining good records is invaluable when it comes to substantiating your per diem claims. It’s, therefore, crucial to keep your meal receipts as the IRS will want to see evidence of your claim.
Additionally, use a calendar to mark your full days and partial days (when you’re home for some time, such as the days you left or returned home). The per diem rate for partial days is 3/4 (0.75) of that of a full day.
For full days, calculate your per diem deduction as (number of full days) x ($66/day) x 100%.
For partial days, it’s (number of partial days) x ($66/day) x 100% x 0.75.
Add the two answers you got, and then multiply the figure by 100%. That gives you the actual amount of your meal tax deduction.
What is Considered Per Diem Meal Deductible for Truck Drivers
The per diem deduction only applies to meals the truck driver has when away from home on business. So, as an owner-operator delivering goods miles away, you enjoy tax savings on your meals while lodging. However, the deduction doesn’t apply for meals you have when on a pleasure trip or any other trip unrelated to your delivery services.
Maximizing Your Tax Liabilities by Properly Reporting Deductible Expenses
Having records of your per diem tax-deductible expenses will not only help you substantiate your claims but can also help you in the future. Ensure your documentation is accurate for the full and partial days, and keep the record for a minimum of 5 years after you’ve filed your taxes. This way, you can always present them if questions arise or you’re audited.
And even most significantly, your per diem tax deductions can greatly cut down on your tax bill.
Have more questions about how the new per diem changes affect your trucking business? Contact us now, and we’ll gladly give you all the help you need.
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