Analysis Shows Owner-Operators Benefiting From Trump Tax Cuts

Truck drivers hauling for their own business received a lift in 2018 from President Donald Trump's Tax Cuts and Jobs Act, according to analysis from tax consultancy ATBS.

That assessment, however, which was based on preliminary data compiled from over 3,000 tax returns by the Lakewood, Colorado-based company, did not align with concerns from members of Black Smoke Matters, who blame the President's tax cut legislation for smaller paychecks.

The ATBS survey found that the average owner-operator's taxable Adjusted Gross Income increased from $43,093 in 2017 to $52,180 in 2018 – a 21 percent jump related mostly to a "booming year" in the transportation industry, ATBS noted. During the same period, the average owner-operator's actual tax liability increased only 12.6 percent, from $8,242 in to $9,284. The overall effective tax rate for owner-operators in the survey dropped from 19.1 percent in 2017 to 17.8 percent in 2018, a 1.3 percent reduction.

ATBS, which specializes in smaller owners and independent contractors, cited several reasons for the tax relief they were seeing for their clients. It noted, for example, that 68 percent of ATBS owner-operators took advantage of the "Qualified Business Income" deduction – new with the 2018 tax cuts – which on an average deducted $6,235 from their tax liability.

In addition, clients' average standard deduction increased from $9,439 to $18,862, with the number of drivers filing the standard deduction increasing from 71 percent to 94 percent. This was a direct result of standard deductions nearly doubling with the tax law changes, according to ATBS, which increased from $6,500 to $12,000 for individuals, from $9,550 to $19,000 for single parents, and from $13,000 to $24,000 for married couples.

ATBS also found that the average owner-operator depreciation deduction increased from $17,072 in 2017 to $20,965 last year. "The significant increase in depreciation was a result of the Tax Cuts and Jobs Act allowing faster depreciation methods than prior years," according to the consultancy.

The only downside that ATBS attributed to the 2018 tax changes was the Affordable Care Act's individual mandate penalty, with 28 percent of ATBS clients paying the penalty last year at an average amount of $1,027. The penalty will not be in effect for the 2019 tax year, the company stated.

The Owner-Operator Independent Drivers Association was not immediately available to comment on the ATBS analysis.

The trucker group Black Smoke Matters, however, which has been protesting over-regulation by the federal government, says the Trump tax cuts are responsible in part for making it more difficult for independent truckers to make a living.

Several members of the group complained in a June 5 MSNBC interview that the elimination of the per-diem deduction in the new tax code caused their tax bills to increase. "I have a young family at home, and with the per diem, they took that out – that made an $8,000-dollar difference in what I personally paid," said one driver during the segment.

The White House responded that "rate cuts as well as enhanced child tax credits should offset the need for those deductions," according to the report.

But Kevin Rutherford, who advises small-business drivers on tax preparation, explained earlier this year that while company drivers lost the ability to deduct the daily $63 meal per diem off their taxes, owner-operators should have been able to continue using the per diem and deduct it on their taxes through Schedule C or on their corporate return.

Combined with other business expense deductions and a new 20% deduction on pass-through corporations (if your business is structured that way) there still should have been plenty of tax benefits, according to Rutherford.

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