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Wednesday 27 May 2020
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A short lesson on spending and tax deductions

There is always someone trying to sell you something for your truck.  Whether it’s a salesman at a parts counter, or an ad you’re reading in a trucking magazine, they will often tell you “it’s deductible”.  They may even be right about that.  Just because something is deductible, doesn’t mean you should spend the money on it.  Here’s a very simplified example:

We’ll say that your income is $100 and this puts you in the 25% tax bracket.

You have the choice of spending $50 as a deductible expense, or not spending the money, and paying the taxes on it. expense for the same thing.

The first option comes out as: $100 – $50 = $50 – 25% = $37.50 take home after taxes.

The second option comes out as $100 – 25% = $100 – $25  = $75.00 take home after taxes.

While this is greatly simplified, it serves to get the idea across. Just because something is deductible, doesn’t mean it’s a good deal. The bottom line is, your bottom line. Consult your tax adviser about what is more profitable given your particular tax situation and income bracket.

Whatever way you go, look at the total cost. All of that money is going to come out of your pocket. Make sure it’s within your ability to earn with a comfortable profit margin left over.

If you can buy a truck outright for cash, that’s the best way. Then, even if freight gets even worse than it is now (which could happen) you won’t have to worry about making those easy weekly payments.

Now, you’re the proud owner of your very own truck. This is when the headaches really begin.

Your wife isn’t going to get an anniversary present this year because you had to replace your turbo.

Little Johnny’s not going to get a new bicycle for his birthday because you need a new steer tire.

You missed Little Mary’s soccer game because you had to change the oil.

The dog is going to have to wear a ragged sweater so you can put on a new muffler.

The list goes on and on.

Then, there’s all of the paperwork, and the money that has to go with it. Estimated taxes. Self-employment taxes. Federal Heavy Vehicle Use Tax. State income tax. Ad Valorem tax. Fuel Tax. Taxes that you never knew existed. You’d better have been putting aside a chunk of money every week. The government has NO sense of humor when it comes to not paying taxes on time.

You’d also better be *real* careful with birth control, because the exorbitantly priced medical insurance you had to buy doesn’t cover pregnancy for the first two years.

Are you sure you want to be an owner-operator?

If you read this and it helped you, or you have questions this page didn’t answer, please leave a comment. If you don’t want your comment published, add “not for publication” at the beginning.

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