How does per diem work for truck drivers?

Per diem for truck drivers is a flat daily amount used in place of tracking every meal and incidental cost. A company can pay it to a driver, or an owner-operator can use a set daily rate to figure a meal deduction. Either way, the rate generally comes from an amount the IRS publishes. For people subject to DOT hours-of-service rules, the deductible portion of meal costs is generally limited to 80 percent. This guide explains the concepts only. It is not tax, legal, or financial advice, so confirm details with the IRS or a qualified tax professional.

What per diem is

“Per diem” means “per day.” Instead of saving every fast-food and diner receipt, you use a fixed daily figure for meals and incidental expenses (M&IE) while you are away from home overnight for work.

The IRS publishes per diem rates each year. It generally publishes a special M&IE rate for workers in the transportation industry, separate from the rates used for other travel.

Per diem covers meals and incidentals only. It does not cover fuel, repairs, insurance, or lodging.

Company-paid per diem versus the owner-operator deduction

These two are often confused, but they work differently.

Company-paid per diem. An employer pays a driver a daily amount, sometimes in addition to wages. Whether that money is taxable to the driver generally depends on how the employer sets it up and whether it follows IRS accountable plan rules. Under such a plan, the driver generally must substantiate the business purpose, time, and place of the travel. Payments that don’t meet the rules may be treated as regular wages. Ask your employer how it is handled, and check the rules with the IRS or a tax professional.

Owner-operator meal deduction. If you run your own authority or work as an independent contractor, nobody pays you per diem. Instead, you may be able to deduct meal costs on your own tax return. Generally, you can choose between deducting actual meal costs, backed by receipts, or using the IRS’s set daily rate for each day you were away on business. Either way, the deduction is generally subject to the percentage limit described below. The IRS also has special rules for partial days, such as the first and last day of a trip, so check how they apply to you.

Employee drivers should know that the rules on whether employees can deduct unreimbursed work expenses have changed in recent years. Confirm current rules with the IRS or a qualified professional rather than assuming.

The 80 percent limit and why you need the current rate

Most business meal costs are subject to a 50 percent limit. For workers covered by DOT hours-of-service limits, which generally includes commercial truck drivers, the limit is generally 80 percent instead. Because tax rules can change, confirm that this still applies to you.

The IRS updates the daily rate, generally once a year. A number printed in an article, a forum post, or a video may be out of date by the time you read it. Look up the current transportation-industry M&IE rate on the IRS website before you file or set up pay. The same goes for the 80 percent figure: check the IRS’s current guidance.

A worked example

These numbers are sample figures for illustration only. They are not the real IRS rate.

• Sample daily rate: $100
• Days away overnight on business during the year: 200
• Sample limit: 80 percent

Step 1: Multiply the rate by the days away. $100 × 200 = $20,000.

Step 2: Apply the 80 percent limit. $20,000 × 0.80 = $16,000.

In this example, the meal deduction would be $16,000. The example ignores partial-day rules. If the real rate is different, replace the $100 with the current figure from the IRS. A deduction is not the same as a tax savings. How it affects an actual tax bill depends on individual circumstances, so a tax professional can help with that.

Records to keep

Even when you use the flat rate, you generally still need to show that you were traveling for work. Records to consider keeping:

• A log of dates and locations for each trip, including the nights you were away from home
• Dispatch records, bills of lading, or trip sheets showing where and when you drove
• Your hours-of-service logs
• Receipts, if you deduct actual meal costs instead of the flat rate
• Employer statements on per diem paid, if you are an employee
• A note of which rate you used and where you found it

Ask your tax professional how long to keep these. Many people keep tax records for several years.

Common mistakes

• Using a rate from an old article instead of the current IRS figure
• Claiming per diem for days you were home and not away overnight
• Confusing the owner-operator deduction with employer-paid per diem
• Forgetting the percentage limit, or using the wrong percentage
• Mixing in lodging, fuel, or other costs that per diem does not cover
• Having no trip log to back up the days you claimed
• Assuming a company’s per diem is automatically tax-free without checking how it is set up