Let’s talk taxes! . . . Wait! Don’t go! It’s more exciting than you think. We promise! As an independent freight agent, you own your own business. And that brings some unique tax benefits as an LLC owner. Think owning an LLC hurts your taxes? Think again!
Freight professionals currently working in a W2 setting may need to familiarize themselves with the tax implications if they become an independent freight agent. You might be pleasantly surprised at the positive impact an LLC can make on taxes for freight agents!
“The tax opportunities available to 1099 workers are vastly different compared to W2 employees,” explains Jordan Churchill, a financial advisor with Renaissance Financial. “As a 1099 contractor, you can take advantage of certain write-offs and strategies that aren’t available to W2 workers. You can significantly reduce your taxable income by leveraging certain investment accounts and doing some strategic planning with your CPA and financial advisor.”
If you’re intimidated, intrigued or a little of both, we’ve got you covered. Whether this is your first year of business, you’ve recently expanded, or you’ve been in the freight industry for years, these freight agent tax tips may help lower your tax burdens. Let’s dive in!
Taxes for Freight Agents: Deductions vs. Credits
Similar to what you’ve seen in your personal taxes, a tax deduction is an expense that’s subtracted from your total taxable income to reduce the total amount subject to tax. These are often called “write-offs.” Alternatively, a tax credit reduces the amount of taxes owed overall and is completely separate from your income or expenses.
For independent freight agents who own an LLC, deductions often include home office space and supplies, internet and phone expenses and much more. There are specific IRS rules that only allow LLCs to qualify for certain tax credits, or for certain expenses to count as tax deductions. But working with a tax professional will help you easily navigate criteria for independent freight agent taxes.
The Power of the 20% Deduction
One of the most significant tax benefits for freight agents comes from the Tax Cuts and Jobs Act of 2017 and includes a tax deduction for self-employed income that reduces your taxable income on your federal tax return. Those in a pass-through entity (like a partnership, S-corporation, LLC or sole proprietor) can apply a 20 percent deduction on net business income, subject to some limits.
Let’s break this down with a simple example:
If you make $100,000 in revenue and you have $20,000 in expenses, your net business income is $80,000. You can then apply the 20% deduction, which equals $16,000. As a result, your federal taxable income becomes $64,000. That’s a substantial saving!
Additionally, the standard deduction remains significantly higher than pre-2017 levels. As of the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. The child tax credit remains at $2,000 per qualifying child under 17 years of age, with up to $1,600 of that amount potentially refundable as the Additional Child Tax Credit (subject to income limitations).
Navigating Self-Employed Taxes
The “self-employed” label typically includes independent agency owners and subcontractors. As a result, you’ll most likely need to complete IRS Forms 1099 and W-9 throughout the year.
Each year, the average freight agent turned small business owner commits hours to preparations before filing their taxes. So one of the best decisions you can make is to create a tax plan alongside a tax professional and a financial planner, to ensure you stay organized throughout the year.
As a business owner, you have the flexibility to plan your finances in a way that aligns with your long-term vision. Working with a trusted advisor can help you take advantage of tax benefits for freight agents and ensure you’re taking the right steps to achieve your short and long-term goals. As Matt Leonard, a partner at Leonard & Leonard CPAs, explains, “When you are a business owner, you can work with an advisor to create a plan that meets your life and business goals. Whether you want to build your business over the next 20 years, save up to buy a house or invest in your retirement, having that flexibility and expert guidance is invaluable.”
One of our key freight agent tax tips? Find a trustworthy tax professional to help you keep track of the correct receipts and documents throughout the year and pay estimated quarterly taxes on time, rather than finding yourself in a stressful situation with missing information. As with most things in life, an expert partner on your side can make all the difference, both today and as you plan for the future of your freight business.
Key Tax Benefits for Freight Agents
Many tax credits and deductions are available specifically for transportation businesses! Keep in mind that many of these will vary depending on your home state, and a qualified tax professional will be able to explain which deductions are available in your state, as well as which apply to your specific independent freight agent taxes.
Here are some credits and deductions frequently used by freight agents to save money on their tax bills:
Home Office Deductions
If you’re using your home for business purposes, you can potentially write off the entire or partial cost of utilities, mortgage interest, repairs, home insurance, or office supplies. Translation? Significant savings on taxes for freight agents who primarily work from their home office!
Vehicle and Fuel Expenses
If you’re traveling often for work, you may be able to deduct the cost of car-related expenses or standard mileage rates. Regardless of which route may apply to you, it’s important to keep accurate records of all receipts and mileage, in case your business is audited in the future.
Here’s a life hack for independent freight agent taxes: Leverage apps like MileIQ or Smart Receipts to track all your mileage and business expenses. These tools make it easy for you to stay organized and maximize deductions while you focus on what really matters: building relationships and growing your business.
Per Diem Allowances
Any meal, lodging or incidental expenses incurred while you’re traveling away from home for work can be written off if you’re a transportation company owner. The GSA provides updated per diem rates that you can reference when calculating these deductions.
Depreciation Benefits
Depending on the life of your asset and your state’s rules, you may be able to benefit from accelerated or additional depreciation. Check with your tax professional to see how these may apply to your independent freight agent taxes.
Additional Deductions for Freight Agents
Beyond the major categories above, tax benefits for freight agents include these potential deductions:
- Health insurance premiums
- Business meals (generally 50% deductible)
- Office supplies and equipment
- Technology purchases and subscriptions
- Business travel costs
- Cell phone bills (business portion)
- Professional development and continuing education
Essential Freight Agent Tax Tips
Beyond understanding deductions, here are some freight agent tax tips that are helpful for any self-employed freight agent:
- Open separate checking and savings accounts for your business
- Obtain a company credit card
- Keep meticulous records of your expenses, including receipts and invoices
- Work with an accountant to maximize your deductions
- Understand your quarterly estimated tax payment obligations. As Jordan shares, “It’s painful at first, but you have got to pay quarterly taxes. It is so important. Even when you’re in your first year or two, it’s important to get in the habit of doing it.”
Important Tax Dates for Freight Agents
Mark these critical tax-related dates on your calendar:
- January 31: 1099s are due
- March 15: Deadline to file business taxes
- April 15: Deadline to file personal taxes
If you file an extension, the dates are:
- September 15: Business taxes
- October 15: Personal taxes
Independent Freight Agent Taxes: How Tallgrass Supports our Agents
By partnering with Tallgrass Freight, you have access to the immense wisdom of our back office, as well as the expertise and support of our team. There’s nothing better than having someone who’s been in your shoes by your side. You also benefit from the upsides of being an independent contractor. You’re never going to be left alone to figure out the answers to questions surrounding taxes for freight agents.
Continuing Education on Tax Matters
At Tallgrass Freight, we believe in supporting our agents’ success through education. Our continuing education series regularly includes sessions focused on freight agent tax tips and strategies for building a thriving business.
We’ve hosted expert-led seminars on:
- Understanding the latest tax reform changes
- The ABCs of establishing and managing LLCs
- Maximizing deductions for independent freight agent taxes
- Year-round tax planning strategies
The Best of Both Worlds
Here at Tallgrass, you truly get the best of both worlds. Our agents run their own LLCs, but they can take advantage of the back office support and professional partnership unlike any other. Agents from across the country benefit from our collective knowledge while building the career they’ve always envisioned for themselves.
On the surface, taxes for freight agents might seem more complicated for those who are self-employed. Yet, like your career, you have more control over your finances and your tax benefits as opposed to being locked in a W2 situation in which the company reaps the benefits, not you. With thorough record-keeping and guidance from a tax professional, you can establish a process that ensures you meet your obligations while maximizing all the tax benefits for freight agents available.
Take Control of Your Tax Benefits as a Freight Agent
As an independent freight agent with your own LLC, you have opportunities to optimize your tax situation in ways that W2 employees simply cannot. While this comes with additional responsibility, the tax benefits for freight agents are hard to ignore.
As Matt sums it up: “In a nutshell, when you’re starting a business, you need three key people on your team: a good CPA, a good financial advisor, and a good attorney. As your business grows and you start making money, don’t forget to protect it by purchasing insurance. The way to protect your business when you start is to have a good team. The way to protect your income is to have good insurance.”
The key is to be proactive, organized, and informed. Work with qualified professionals, take advantage of continuing education opportunities, and keep meticulous records. By doing so, you can minimize your tax liability while focusing on what you do best: growing your freight business.
Ready to enjoy the tax benefits for freight agents with the support of an exceptional team? Reach out to our team today to learn more about the Tallgrass Freight agent network.