Transportation Industry Adjusts to New Tax Laws Surrounding Per Diems

Effective in 2018, new tax laws were put in place regarding the treatment of per diems for company drivers and owner-operators within the transportation industry. A per diem payment is a reimbursement, as defined in Internal Revenue Code and Regulations, designed to cover meals and incidental expenses of drivers when they’re away from home. The new laws will have the greatest impact on company drivers.

Previously, drivers and owner-operators were able to exclude from taxable income any per diem received as reimbursement. The transportation company took a deduction for the per diem paid and the only record keeping consisted of logging days away from home.

When companies didn’t pay the per diem as reimbursement, drivers were able to deduct $63 per day as an “unreimbursed employee business expense” on Schedule A of their individual tax returns. Owner-operators could deduct the $63 per day as a business expense on either Schedule C of their individual returns or on their business entity income tax returns.

With the change in the law, owner-operators will still be able to deduct per diems as before, but with the elimination of all employee business expense deductions, company drivers lost the ability to claim per diems on their individual tax returns. The new standard deduction ($12,000 for individuals, $24,000 for married filing jointly) should help to offset some of that forfeiture.

A better answer for many companies and their employee drivers may be to establish the per diem as a reimbursement plan, which could exclude the payments from drivers’ taxable income yet still give the company a deduction. In this tight driver labor market, having per diems treated as nontaxable income could be a great recruiting and retention tool.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2023 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Automobile, Tax BY Brett Cubellis
Explaining the Transfer/Advance Payment of Clean Energy Credits and Energy Credits Online Registration
New Research and Development Capitalization Requirement Shuffles System
Contractors May Benefit From SALT Cap Workaround
2023 Legislative & Regulatory Update
Tax BY Kirk Mitchell
Can “Moore” Tax be Refunded from IRS? How to Protect Your Potential Claim for Refund of §965 Foreign Corporation Transition Tax
Fraud, Tax BY Charlotte Garraway
5 Red Flags of Fraudulent ERC Providers
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Pittsburgh

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×