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 who are 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 your taxes!
If you’re intimidated, intrigued or a combination of the two, 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, this information may help lower your tax burdens. Let’s dive in!
Tax Deductions vs. Tax 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 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 navigate these criteria.
Navigating Self-Employed Taxes
The “self-employed” label typically includes independent agency owners and subcontractors. As a result, you’ll most likely need to fill out 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 financial planner — to stay organized throughout the year.
We recommend finding 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.
Tax Deductions for the Freight Industry
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 circumstances.
Here are some credits and deductions frequently used by freight agents to save money on their tax bills:
- Home Office: 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.
- Vehicle and Fuel: 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 good records of all receipts and mileage in case your business is audited in the future.
- 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.
- Depreciation: Depending on the life of your asset and your state’s rules, you may be able to benefit from accelerated or additional depreciation. Check in with your tax professional to see how these may apply to your taxes.
How Tallgrass Can Help
By partnering with TGF, you have access to the immense wisdom of our back office, as well as the expertise and support of our team. You also benefit from the upsides of being an independent contractor. Still, you’re never going to be left alone to figure out the answers to these big tax questions.
Here, it’s the best of both worlds. Our agents run their own LLCs, but they get the back office support and professional partnership unlike any other. Reach out to our team today.