Per Diem CPM tax implications and other questions.

Someone told me cheap trucking companies use it to boost the bottom line of what you get on your paycheck. A lot of truck drivers don’t really bother to sift through the numbers, they just go by what gets put in their bank account each week. So if at the end of the week, that $1200 check ends up being $1300 because of per diem, it’s a win for the trucking company. When in reality, in the long run the truck driver is probably getting short changed.

 

To take part of your pay away is not what per diem is. Your total taxable income goes down, while you're actual income stays the same. You get a bigger check at the end of the week for basically nothing. Like mentioned it does impact your social security benefits, but those are crap as is. You should be using some of that extra pay check to invest outside of a 401k. Whether it be regular stocks, a Roth IRA, CDs, etc. Do not rely on social security for retirement.

 

Good advice. You cannot rely on Social Security. Please don't rely solely on a company 401k. You can do better than most of those on your own.

 

By using per diem, it reduces your earned income. For some, that can be a big advantage. Driving is not my only income. However, the other money I get is subject to means testing and if my earned income is too high, my other gets reduced. So, it can offer a worthwhile benefit for some. However, I think most, who only rely on trucking income, I don't think taking per diem is worth. Too many bad side effects such as its effect on your social security and also your income when dealing with things such as loans.

 

It wasn't a downside for me. I have been approved for a mortgage and car loan etc.

The mortgage company actually requested bank statements and pay settlements for the previous 3 months so they clearly weren't just going by W2/income info.

 

This ...

 

Any mortgage lender I’ve ever heard of, will not count income towards your loan ratio unless it’s on your tax return. Unless you pay taxes on it, it didn’t exist. I know this for fact. Back when I used to sell on eBay and rent it on Airbnb before the tax man got involved, I was making a lot of money and no lender would even consider that unless I file taxes on every penny of it. Back then I was under the required amount to report it.

The only income Lenders will consider that as nontaxable is like people who do adult foster care, care for people in their home with developmental disabilities and they get a tax-free stipend. Other than that, if it didn’t go on your tax return it didn’t exist as far as they’re concerned.

 

Could you give some specific examples please?

 

You are correct - a - Mundo. They go strictly by your taxable income.