Per diem or not per diem? with Gordon Trucking

Not sure exactly what theirs would be like - but my husband was fortunate enough to get a per diem several years ago at one company he worked for - it was wonderful.

We had lived in our small home for many years, and didn't have much left on our mortgage, so even with his on the road expenses, we couldn't itemize them on our taxes. (With both of our paychecks, we made too much to itemize, with no more deductions than we had.) So each time, we couldn't take anything related to his job.

Then - he worked for a couple of years for a company that had per diem - it was awesome. A certain percentage of his pay each week was per diem - I no longer remember how much it was - but I think it is based on IRS guidelines - and is for a certain amount per day. Long story short - the per diem was non-taxable money - like a reimbursement for his over the road expenses. As a company driver - it was like getting a raise of close to $100 a week. He had been doing the exact same job - except with different contracted haulers - so had made the exact same money with the previous carrier. The company they contracted for asked for the new company to hire my husband to continue on - and we suddenly had almost $100 more a week to live on!

You might want to check with your tax preparer to see which way would be best for you.

 

As a transportation worker we are subject to the HOS regs. Along with those regs we were permitted to claim $52.00 per day in the contiguous US for each day that we were away from our tax home and were required to take a "rest period." Now 80% of that $52.00 figure is all we could deduct when we filed taxes this past year. For next years tax return I think the rate may be going up to $58.00 per day (80%).

The company sponsored "per diem" plans reduce your taxable earnings but you forfeit the right to itemize this particular deduction on your taxes in the Spring (unless your carrier "underpaid" the per diem amount to you during the year). Of course if the carrier "overpaid" the allowable per diem you must then claim the overage as additional "untaxed" money and pay any tax (if owed).

A carrier is able to save a substantial amount of money when ever they can get an employee to accept a per diem plan. They do not have to pay Social Security or Medicare taxes on that money. Unemployment and disability benefits are also reduced.

Through lowering your gross earnings per year you may have difficulty qualifying for a mortgage or other long term financing. Based on working away from home for 300 days ($52.00 x .80% = $41.60 per day. Rounded up to $42.00 per day x 300 days = $12,600 deduction). There is slightly more to it (example when itemizing medical deductions you are only able to deduct the amount above 7 1/2% of your AGI, with the per diem deduction I believe the amount deductible is 1 1/2% above your AGI). This is money you are entitled to deduct anyway. Why let a company short change you???

Of course your Social Security benefits are based on your lifetime contributions and weighted based on the last 5 years of contributions so you may want to keep this in mind as well.

There are some very good threads within this forum discussing this topic in more detail. Simply type "per diem" into the search section and you should have plenty of info available.

For the record, I am opposed to accepting a per diem plan from a carrier. From what I have seen it is a rip off to the driver especially when a company reduces the rate of pay to get into the per diem plan.

 

Go with the $52.00 a day x 80% allowed by IRS rules.

No receipts required and in the long run you are better off.

 

That depends....

Does he have child support payments?

At his age, it won't hurt him to take the per diem for a short period. It's doubtful he will be retiring from that job. So it will have no real affect on future SS benefits.

If they still exist when he retires, that is.

 

hi danc.

I was speaking only about the amount of taxes paid/refunded at the end of each year. I wasn't even considering SS. But you bring up a valid point.

Another thing I wasn't thinking of was what trucking along stated about itemized deductions. I can see certain scenarios where one might indeed be better off taking the company per diem, now that I have thought more about it.

I suppose one would have to take a look at their overall tax situation as far as deductions go. But I imagine that $12,480 is high enough for many folks to be better off by itemizing (52.00 x .80 x 300) I imagine that many OTR drivers are on the road for a lot more than 300 days a year.

 

Search per diem and read my old post on the subject. I changed my username, was written by dirtydawgjake. It will give you a breakdown of it. I would probably take the per diem plan to finish out this year b/c the daily allowance won't be much more than the standard deduction since its only half a year, unless you plan to itemize anyway for other things then don't take the per diem plan and claim daily allowance of 41.60/day you're otr. Next year get off the per diem plan unless you have special circumstances like alimony (sp?), child support, or whatever.

 

Not if you cannot itemize your deductions

 

When can you not itemize?

As a truck driver you get all your business expenses as a legit deduction plus your interest paid on your mortgage as well as taxes and in some cases medical expenses.