The widespread labor shortage within the trucking industry is a significant cause for concern; without the dedicated truck drivers who deliver our goods, the US economy would grind to a halt – as would the American way of life. To address this growing issue, Representatives Mike Gallagher and Abigail Spanberger introduced a bipartisan bill in the U.S. House of Representatives that, if passed, would create a two-year refundable truck driver tax credit. The goal? Attract new drivers to the industry, improve the retention rate of existing drivers, and address the labor challenges we’re facing head-on.
Below, we’ll dive into what exactly a tax credit is, go over a few key tax credits for small business owners such as yourself, and explain what the proposed Strengthening Supply Chains Through Truck Driver Incentives Act entails.
How Do Tax Credits Work?
The government uses tax credits to reward businesses for certain activities or encourage the expansion of key industries – in essence, they’re a financial incentive designed to create a desired outcome. For example, you’ll see tax credits for hiring people who face barriers to employment, environmentally-friendly business practices, and investing in research.
Tax credits reduce what you end up paying in taxes, but they aren’t to be confused with tax deductions. Tax deductions lessen your tax burden by decreasing your taxable income, while tax credits allow you to subtract a certain amount from the taxes you owe, reducing your taxes on a dollar-for-dollar basis.
There are, of course, limits to how much you can subtract. But, if you exceed your tax credits for the current tax year, you aren’t out of luck. You can carry an excess truck driver tax credit backward by applying it to a previous return or carry forward the credit onto the next tax year.
Tax Credits Every Small Business Owner Should Consider
While a specific truck driver tax credit has yet to be passed, there are a number of credits small business owners of all varieties should consider.
Credit for Small-Business Health Insurance Premiums (Form 8941)
Born out of the Affordable Care Act, this tax credit could be worth up to 50% of the costs you pay for your employee’s health insurance premiums. The credit applies to small businesses that provide health insurance to employees and meet the following conditions:
- Have fewer than 25 full-time or equivalent employees
- Have an average employee salary of about $56,000 per year or less
- Pay half or more of their employees’ health insurance premiums
- Offer Small-Business Health Options Program (SHOP) coverage to all of your full-time employees
Employer Credit for Paid Family and Medical Leave (Form 8994)
Employers who provide paid family and medical leave to their employees may be able to claim a credit for paying wages to employees on family or medical leave for up to 12 weeks in a given year. The credit starts at 12.5% of the wages that are paid to qualifying employees on leave, and increases incrementally for those who pay over half of employee wages while they are on leave up to 25% for businesses that pay 100% of their employees’ salaries. To qualify for this credit, employers must have a written policy in place that provides:
- At least two weeks of paid family and medical leave (annually) to all qualifying employees who work full time (prorated for employees who work part-time)
- Paid leave that is not less than 50 percent of the wages normally paid to the employee
Work Opportunity Credit (Form 5884)
The Work Opportunity Credit was designed to encourage businesses to hire employees from underserved populations. The exact amount you’ll be able to save from this credit varies based on which populations you hire, but it’s generally equal to 40% of up to $6,000 of employee wages. Qualifying employees include:
- Family assistance or food stamp recipients
- Individuals convicted of a felony
- Individuals who have faced long-term unemployment
- Individuals receiving Supplemental Security Income (SSI)
- Designated community residents or summer youth employees living in federal empowerment zones
Biodiesel and Renewable Diesel Fuels Credit (Form 8864)
Biodiesel and Renewable Diesel Fuels Credit, though not technically a truck driver tax credit, can be a huge money-saver for trucking companies. This is a credit of $1 for every gallon of biodiesel or renewable diesel you use to power your vehicles, and considering how much fuel a semi-truck requires, the savings add up.
Credit for Small Employer Pension Plan Startup Costs (Form 8881)
If you set up a retirement plan for your employees, including 401(k) plans, SEP IRA plans, and SIMPLE IRA plans, you could be eligible for a credit of up to $5,000 for three years. To qualify, you must:
- Have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year
- Have had at least one plan participant who was a non-highly compensated employee (NHCE)
- In the three tax years before the first year you’re eligible for the credit, your employees weren’t substantially the same employees who received contributions or accrued benefits in another plan sponsored by you, a member of a controlled group that includes you, or a predecessor of either.
The Truck Driver Tax Credit We’ve Been Waiting For
For small business owners such as owner-operators, any opportunity to save money is an opportunity worth exploring, and a great way to save hundreds (or even thousands) of dollars is to claim tax credits. The problem is, there isn’t a specific truck driver tax credit, but there’s no need to fret – big moves are being made. With the proposed Strengthening Supply Chains Through Truck Driver Incentives Act, the dedicated drivers who keep our economy up and running could soon get the truck driver tax credit they deserve.
The proposed Strengthening Supply Chains Through Truck Driver Incentives Act (HR7348) would do the following:
- Create a new refundable tax credit of up to $7,500 for truck drivers holding a valid Class A CDL who drive at least 1,900 hours in the year. This tax credit would last for two years (2022 and 2023).
- Create a new refundable tax credit of up to $10,000 for new truck drivers or individuals enrolled in a registered trucking apprenticeship. This tax credit would also last for two years.
- Allow new truck drivers to be eligible for the credit if they did not drive a commercial truck in the previous year or drive for at least 1,420 hours in the current year. They may receive a proportion of the credit if they drive less than 1,420 hours in the year, but drove at least an average of 40 hours a week upon starting to drive.
File And Pay Your Trucking Taxes With i2290!
Between claiming credits, deducting expenses, and filling out paperwork, paying your taxes can be an uphill battle, but with i2290, filing and paying the HVUT doesn’t have to be. Our process is simple. You answer a few questions about your business and your vehicles, and our software will automatically calculate your taxes for you. You’ll receive an IRS-stamped Schedule 1 in a matter of minutes, which you can access anytime online. Sound good? Sign up for an account with i2290 today!
Special note: This article is for general purposes, and is not intended to provide, and should not be relied on for tax, legal, investment, or accounting advice. The best way to ensure you’re properly filing for a refund or credit and paying appropriate taxes is by following IRS regulations and consulting with a tax professional.