Fuel mileage vs. fuel deduction.

@Gutter you realize that if you spend $100 on fuel let’s say .... you get $100?detuction on your taxes. And if your in the 30 % tax bracket that saves you $30 dollars in taxes. But you had to pay for the fuel. it’s not $1 for $1.......

Again if your making bank it doesn’t matter. But if your hauling for nothing ....

How many miles are you putting on a year at your job? That will tell you if the O/O’s are doing all right or not....

 

This is not an uncommon mis understanding. Here’s a way to look at it. Taxes are paid as a percentage of NET income. Net income is the amount of money you get to take home after all your business expenses are paid. Many owner operators manage to stay in the 12% federal income tax bracket, so they pay 12% “at the margin”. That’s the last dollar they make.

So, taxes are paid on the net, which is calculated by adding all the money that comes in (your GROSS income), and then subtracting everything you bought for the business ( expenses). Gross income - expense is net income (profit).

So, let’s say we get sloppy and spend $10,000 more on fuel than we have to, so our expenses increase by $10,000. We subtract an additional $10,000 from our gross income and also reduce our net income by $10,000.

we fill out our tax form, and the government sees you’re in that 12% tax bracket, and your tax bill is reduced by 12% of $10,000, or $1,200.

Now, very few people are naive enough to not care about operating expenses, but I have heard countless times guys buying new trucks, new trailers, new chrome, new gizmos “because it’s a business expense and tax deductible”. It helps to realize it has little more net effect than a sales tax holiday for the average business owner. You’re spending $9 to save $1. You will see accountants fall in this trap. “You need a tax deduction”. If you’re going to buy it anyway it can make sense to buy it a month early and move the deduction into this year, but you can’t make money by spending money.

 

That’s a good explanation -

On your final point, rather than buying another trailer or big ticket item, you can always buy 18 tires, a drum of oil and 2 cases of filters in December if you think you’ll use them in January - March, and you’re looking to reduce taxes to be paid.

 

Right on @blairandgretchen. Pre paying expenses is also legal, to a point. Examples are paying your insurance, parking contract, truck wash service, cell phone bill, any business license fees, memberships, ELD, load board fees, prepass: you are allowed to prepay expenses by up to 12 months.

 

you forgot the 15.3% self employment tax

 

I also “forgot” state and local income taxes, sales tax, excise tax, and who knows what other diabolic government schemes that burden the working man.

Which changes the point not one whit.

 

You make too much money. You should split your income with me and reduce your gross income. That will help lower your taxes.

 

you don’t get to keep it until you pay taxes on it