How Per Diem works now

Concerning the highlighted portion, I'm pretty darn close to that. I'm ok with paying an astronomically high amount in taxes. It makes me feal warm and fuzzy inside knowing I'm helping supporting the same knuckle dragging welfare rats that cut me off all day long.[/QUOTE]



For you to pay 22 percent in Federal Taxes means that if you make 50,000 then you pay 11,000 in Federal Tax.
But you don’t pay that much in Federal Tax.

 

For you to pay 22 percent in Federal Taxes means that if you make 50,000 then you pay 11,000 in Federal Tax.
But you don’t pay that much in Federal Tax.[/QUOTE]
Ya, I know how percentages work.

Looking back you were right, I was way off only paid 19% in effective federal tax rate last year

 

Nevermind

 

Where to begin?

One, effective tax rate has nothing to do with this discussion. Per diem reduces your AGI, and therefore your MARGINAL tax rate. For 2018, if you have an AGI between 32 and 82K (most of the folks here), then your marginal tax rate is 22%.

Per diem also comes before FICA, so there's another 7.5%. My marginal state income tax is 8%. Add any local income tax if you would like, but that whole mess together looks an awful lot like 35 to 38%.

Take the above mentioned $15,000 in Per Diem, and that 35% ACTUAL taxes paid, and it looks like $5,000.

It has been mentioned in this thread that people DON"T want to take this deduction because it reduces their ability to finance things. To which I say: are you OK? Do you need a doctor? Shall we call someone?

How long do you have to be off your meds to argue that paying the government an extra $5 large per year for the privilege of paying the banks a bunch more interest each year?

HOW IS THAT A GOOD THING?

Back to the reduced AGI part. With your family income reduced, you now are looked upon with great favor by colleges, and they throw free money at your rotten teenagers in the form of grants, so they actually will move OUT OF THE HOUSE!!!!!

With your reduced income, you can now go on the exchange, and buy an actual health care plan, and the Federal Government pays the majority of the bill.

With the reduced taxes and the increases in some of the benefits mentioned, taking per diem can save a family considerably more than 10K per year. I know, I had to of those rotten teens in college at the same time. Per diem made both eligible for both Federal grants and outside scholarships. Worth nearly 20K per year.

So, yeah, I'm a big fan of per diem. Not being able to borrow money is not a big problem when you have CASH in your pocket....

 

When figuring out the total impact tax has use the effective tax rate not the marginal. You only pay 22% on a portion of your income. If you look at income based taxes (fed, state, fica, medicare) you will see people warning between $50-100k pay an effective overall tax rate pf 15-16%.

Finally again - my CPA tells me the company per diem plan will hurt me in the long run.

 

A) You're missing the point that companies are paying drivers less for the privilege of per diem.

B) It is not all about borrowing money. Any GAI based figures are affected.

3) Drivers can still deduct these expenses in certain cases.

4) Gotta love the CPA's at truck counter. They are so good they drive a truck for a living

 

1) some do. We don't. We pay drivers the actual per diem due. This increases our costs because per diem is not 100% deductible as a business expense (wages, of course, are), so this does increase our costs. if you work for a compn=any that doesn't treat you right, this is a great time to find a better one...

2) Thank you for repeating the point I made earlier. Yes, some things like SSI and SSI disability, so yes, you should save some of the tax savings to add to your IRA and to buy a long term disability and life insurance policy. All easy to do wehen you have CASH IN YOUR POCKET. In other cases things like alimony are reduced. Each tax payer gets to evaluate what is best for them. What a country!

3) Pray, tell, how company drivers can deduct these expenses?

4) Thanks for pointing out you are the driver giving the tax advice......

 

I'm sorry, but you are simply wrong.

Lets do some big number math real quick. Let's assume 50K AGI, 22% tax bracket, 15K per diem.

The income between 32K and 50K is taxed at 22% (our progressive tax system at work). So, yes, the LAST 15K is taxed at 22%. Now, since we only take away the LAST 15K, we do, indeed, save 22% (federal) on that 15K per diem deduction.

If you make, say, an AGI of 40K, then of the 15K per diem deduction only 8K is taxed at the 22%, and the NEXT 7K is taxed at the next tax bracket, which is 12% in 2018. So there is an average tax savngs of about 17%.

In neither instance is the EFFECTIVE tax rate (the average tax rate over the entire driver's income) relevant to the discussion. Only the MARGINAL tax rates are involved.

Finally, IN YOUR CASE, it may indeed be true that your accountant recommends that per diem is not a benefit to YOU. There is a real possibility he is wrong, but that aside, for the vast majority of drivers, per diem is the far better choice.

 

Bullcrap it costs you a dime.

I am fine where I am.

I have alternate income. I get to file schedule C(?) and can claim it.

Never claimed to be an accountant. Just using the 6" between my ears as something besides a hat rest. All you folks think this is so.e great mystery. Say things like it costs the company. Horse crap you save on employment taxes, work and comp, and disability insurance. Lie to someone that can't read.