And all of this changes again in 2008 when the percent of per diem that can be deducted rises to 80%

Pesonally, after looking at the numbers and talking to a tax person, I am going to save my receipts for EVERYTHING, deduct the per diem at the end of the year and hope the extra expenses is over my 2% threshold.

As previously stated, if the companies offer something it is for their benefit NOT ours.

Mr. Green Jeans

Mr. green Jeans, thanks for your hard work. I'm still not clear on this per diem stuff, but am trying hard to understand. Just one thing though... you posted the following:



Weekly pay $692.40 (2308 miles at .30 cpm)
Withholding Allowance $ 65.38

Taxable Income $672.02
Federal Tax With held $ 77.00
FICA (.0765%) $ 51.41

Take Home Pay $543.61


Mr Green Jeans, if you deduct your withholding allowance of $65.38 from your weekly pay of $692.40, should not your taxable income be 627.02 vice the $672.02 you totaled. And if so, are the numbers that follow affected? I'm still trying to wrap my head around the pros and cons of taking per diem but not sure i follow the math. thanks.

Yup you are right me bad , hit the wrong numbers on the calculator.

Your take home goes down to about 516 a week

It will lower your refund to about $1000

thanks for checking the math.

you think this is confusing wait until you try to figure it out with more dedcutions, insurance, etc

I still think DONT TAKE THE PER DIEM, with the allowed deductions and the miscellaneous deductions (tolls, scales, boots, tools, etc) your better of when the tax man comes

__________________
Mr. Green Jeans

Hey there Mr. GJ. Yeah, my gut is to pass on the company paid per-diem also, but permit me 2-3 more questions, and maybe an assertion. Okay, here goes...

Question #1. When companies offer 30/cpm pay, and .10/cpm per-diem. Does this mean they then pay you .20cpm and the .10/cpm per-diem as a set aside that is untaxed, as was indicated in your example? I know it's seems obvious, but in my military career, per-diem was paid IN ADDITION to regular pay so I was initially confused. (Some newbies also?) But now I'll assume it's a tax-free set aside.

Question #2. Why did you introduce factors such as; Fed Tax Withheld, FICA, Withholding Allowance, etc? I was/am confused by all this. Isn't it just a case of firstly, making at least two basic assumptions. a) How many miles will be driven, and b) how many days will be spent away from home. And then plug in the known variables, (per-diem rate and set amount the Fed allows for meals " 75% of $59 = $44.25 ", And then running the numbers to find which deduction would be the greater sum to deduct from one's Adjusted Gross Income (AGI)? Because that's really the main goal isn't it? To shelter the most of that 30 cents from being taxed. Highest deduction wins right (setting Social Security and 2% of Gross discussion aside for now)? What am I missing? Consider this example:

ASSUMED

Rate of pay 30/cpm
Miles per year 114,400 (2,200 X 52 weeks)
Per-diem rate 10/cpm
Days away 300
Per-diem ded allow $44.25 okay, here we go....

COMPANY PAID PER-DIEM

114,400 X .10 = $11,440 (deducted from AGI)

CLAIMING PER-DIEM DEDUCTION ON 1040

300 (days) X $44.25 = $13,275

$13,275 - $11,440 = and the winner is... $1,835 for the driver who declined to take the company sponsored per-diem pay.

The only problem I see is, as already stated, the driver isn't paying into Social Security. But if they invest that amount, they'll do okay.

I honestly do suspect I'm missing something here, as i'm as green as they come. But would really appreciate being set straight.

Oh, and one last thing (reminded of inspector Columbo). That deduction for miscelaneous work related expenses is different from this whole per-diem thing isn't it? As I understand it, that's for other stuff, like laptops, gloves and lizard spray right? And it can't be deducted until it reaches 2% of your AGI (AFTER) the per-diem is deducted. Is this correct?

Thanks again for all you folks do.

MNNRKR

I am not familiar with per diem in the military but in trucking if you were paid your regular cpm (30 cents) and get 10 cents cpm per diem at the end of the year you would pocket about $1000 in fed tax refund and $12,000 in per diem. I don’t know anyone, including the trucking industry and the IRS that is going to let you have $12,000 tax free.

If this were the case Everyone would be rushing to the companies that paid per diem, heck why not, that is an extra $230 a week tax free.

I included figures for FICA, Fed Tax because they are computed as a percent of your gross pay, therefore they change with how much you make. Withholding allowances also decrease the amount of your gross pay thereby lowering both FICA and Fed tax withheld.

As far as reducing your AGI, per diem is considered an itemized deduction which does lower your AGI. The AGI is used to compute your federal tax liability, lower AGI lower taxes, but remember our taxes are set up in income brackets not linear, the more you make the higher the tax rate.

And yes the deduction for miscellaneous is subject to the 2% AGI condition. But with an AGI of about $19,000 this would mean any amount over $380 would be deductible. That comes out to $7.30 a week, less than a one scale fee, we all should have miscellaneous deductions on are tax forms ( just lot lizard spray could be hundreds a year).


This just goes to show that per diem is a very complicated and confusing area, but as I said before if the trucking companies offer it, it can not be good for the driver.

__________________
Mr. Green Jeans

Still confused... IS the .10/cpm in your example deducted from your .30/cpm pay or not? And I think i understand about the FICA etc being factors at play in all this, but once again let me say... For the sake of comparison... not to consider what you take home weekly vs. your return at years end. JUST THE TOTAL DEDUCTION CLAIMED for per-diem vrs. the TOTAL AMOUNT PAID BY EMPLOYER. It seems to me all else inconsequential in deciding which route would yield the most at year's end. I apologize for the caps, just wanted to emphasize. But yeah, i am getting a bit frustrated. If you would sir, please just let me know what was wrong with the example i gave. thanks

Okay,

When I figured this information I deducted the .10 cpm per diem from the .30 cpm pay rate.

If you get .10 cpm per diem from your company versus not taking the per diem then the deductions you can claim are

Taking per diem

$3,300 per personal exemption
$5,150 standard deduction

$8,450 Total deductions taken on tax forms

Not taking per diem

$ 3,300 per personal exemption
$13,275 ($59 per diem x .75 for 300 days)

$16,575 Total deductions taken on tax forms


If you don’t take the per diem you get a deduction of $13,275 on your taxes using the standard rates and percentages.

If you take the per diem you would get $12,000 from your company and not be allowed to claim it on the taxes.

So, yes just looking at just the deductions, not taking the per diem gives you a better deal.

I hope this has cleared up the misunderstanding and your frustration, if you are still confused I suggest you talk to a tax advisor.

__________________
Mr. Green Jeans

Absolutely and 10-4. I am now enlightened as to the mechanics of per-diem paid vs. per-diem claimed. Thanks to you, and others here. One final thought (?)... It seems one big thing to consider is just the miles one hopes to run. If company gives plenty of miles, it (maybe) better to take per-diem pay as it's based on miles. But if one doesn't get alot of miles, better to just claim deduction on taxes, as the formula used there is just based on on days away from home, regardless of miles. Again, thanks to all for your indulgence, and your patience.

Quote:

Originally Posted by Mr. Green Jeans I did some number crunching using the 2006 IRS information on tax withholding, tax rates and per diem allowances.

first off great info and thanks for that info,I am sure it wasn't much fun, so thanks again...

but,

I have a quick question about this subject, I was just accepted to Central Refrigerated and they pay .29 and .08 is considered per diem...So I have thought alot about this recently and with the great info above from mr green jeans I saw a possible slight oversight.....

I might be wrong though, so please let me know if this is wrong...

One thing that he didn't include in the 2 examples above is the difference in the amount brought home per week!!!

$516.25/wk without per diem taken and $561.71/wk w/ per diem = $45.46/wk more in pocket!!!!!

$45.46/wk X 52 weeks =$2363.92/yr in your pocket more then not taking per diem

now, without taking a per diem you get 999.03 tax refund instead of owing the IRS $135.48

$2363.92 more in pocket a year with taking per diem
-$999.03 tax refund you recieve without taking per diem
$1364.89 more in your pocket with taking a per diem
-$135.48 that you will owe the IRS with taking per diem
=$1229.41 more a year with taking a per diem than not

Is this correct??? I hope so!!!!!!!

I have to admit that it is extremely confusing and wish Central didn't force it apon you, but it seems like it will work out better unless my calculations with the help of Mr green jeans is incorrect???

Thanks and would love some feedback on this...

I would like to know as well.