What is Per Diem?
Per Diem (which literally means “per day”) is one of the largest tax deductions for owner-operators. This tax deduction is one that the IRS allows to substantiate ordinary and necessary business meals and incidental expenses paid, or incurred, while traveling away from home.
Who Can Claim This Deduction?
The IRS allows contractors and self-employed transportation workers, subject to the hours of service regulations that travel for business, to deduct their meal expenses from their income.
As a result of the Tax Cuts and Jobs Act, employees known also as company drivers are no longer eligible to claim the Per Diem deduction.
How Much is the Per Diem Rate and How Do I Know What Days Qualify for It?
The IRS has set the current rate for 2023 at $69 per full day and $51.75 per partial day in the Continental U.S. (last updated October 1, 2021).
In order to qualify, IRS publication 463 states that you are traveling from home if:
- Your duties require you to be away from the general area of your tax home substantially longer than an ordinary day's work, AND
- You need to sleep or rest to meet the demands of your work while away from home.
If you’re an owner-operator, you get to claim this deduction for each day that you’re away from your “tax home”. On the days that you depart and the days that you arrive home, you must claim a partial day allowance, instead of a full day allowance. That is ¾ of the standard allowance.
You may be asking yourself questions like:
- Does taking a nap count?
- What if I’m a local driver?
- What qualifies as a tax home?
At Team Run Smart, we trust the trucking tax experts at ATBS to know the answers. Read their full-length blog for more information, found here: Seizing the Per Diem Tax Break (For Truck Drivers).
What's the Best Way to Track Per Diem?
A good way to track your Per Diem is to keep a separate calendar where you can put an ‘X’ on full days away, and a ‘/’ on partial days. This way, you can count up exactly how many days of Per Diem you have for your tax preparer when tax season rolls around. A good tool to use is the ATBS Mobile App.
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In order to prove your Per Diem, you will need to be able to provide DOT ELD logs with time, date, and location. Also, it's good practice to keep all receipts and documentation of travel for at least 3 years.
Need help calculating your Per Diem deduction, storing your receipts digitally, and filing your taxes? Contact ATBS here!