December 1, 2022
Per diem is a term that's used a lot in truck driving, but it often is very ambiguous. In fact, many truck drivers who see advertisements for open positions, for instance, won't get much more explanation than the hiring company is offering them per diem for their work.
But, what does this mean? It's important for truck drivers to understand what per diem is as well as what it provides to them so they can see how they're being compensated for their work.
At the same time, it's important that trucking companies understand what the rules and regulations for per diem are, as there are limits that are set by the IRS in relation to per diem.
Below, we'll dive deeper into these explanations.

What is Per Diem for Truck Drivers?

Generally defined, per diem is an allowance or payment that's made for each day of work. This is over and above whatever salary or agreed-upon rate a truck driver will get for doing their job.
Per diem in trucking is money paid to truck drivers that's meant to cover some expenses while they're driving and away from their home. For individual truck drivers, per diem pay is not taxable, as long as it meets criteria set out by the IRS.
For trucking owner-operators or independent contractor drivers, per diem will refer to tax deductions they're eligible to take at the end of the year.

What Can Per Diem Be Used For?

There are a number of on-the-road expenses that per diem can be used for. This includes showers, meals, lodging and many additional incidental expenses drivers incur as they're traveling from home. The purpose of per diem is to cover expenses that you incur on the road that you'd normally pay for yourself while at home.
There aren't strict standards on what per diem can be used for within these categories. In other words, you'll have the freedom to choose which meals you want to buy with the per diem you're given.

How Is Per Diem Paid?

Per diem is paid in different ways depending on what classification of worker you are.
Company drivers who are on a W2 payroll will typically have per diem added to the regular take-home earnings. This helps to simplify the process, as these drivers are not required to collect receipts and submit them to get reimbursed. However, company drivers should note that this means they'll likely be fronting the costs and then getting paid back through their paycheck when they receive the per diem.
Some trucking companies will give their drivers a specific credit card that they can use for per diem-related expenses. Not all trucking companies will do this, though, especially if they have a large fleet of trucks or if they have a lot of new drivers.

What About Per Diem for Owner-Operators?

Those who are owner-operators or treated as independent contractors will be compensated for per diem differently.
Instead of being compensated upfront with additional pay to cover on-the-road expenses, owner-operators and independent contractors will instead claim per diem on their annual taxes.
The IRS sets a standard daily rate for per diem for owner-operators and independent contracts that they must abide by. In other words, these drivers won't be able to claim more than the standard rate set by the IRS, even if they spend more money than that allotment while they're on the road.

Per Diem Rates

The IRS sets per diem rates every year, and the new rates go into effect at the start of every new fiscal year, which is October 1. The most current rate, which runs through September 30 of 2023, is $69 for all travel within the continental United States. This covers all M&IE, or meal and incidental expenses.
The IRS also provides a $5-per-day deduction for incidental expenses. There are also increases allowed to the rate if the driver is traveling to what's termed as a high-cost locality, as defined by the IRS. For example, travel within the Phoenix/Scottsdale area in Arizona comes with a per diem rate of $74.

Benefits of Per Diem

One of the main benefits of per diem is that it provides upfront coverage for the meals you will purchase while you're on the road and away from home. If you budget correctly, you'll be able to use the money that's added to your wages to pay for these expenses while you're on the road.
What's more, your per diem amount will not be subject to taxes. This has two benefits. First, it provides you dollar-for-dollar coverage for your expenses, as compared to your normal wages, which are lowered because of the taxes you must pay. Second, it actually lowers your overall taxable income, which could result in you paying lower taxes at the end of the year.
For owner-operators and independent contractors, per diem provides another deduction you can claim when you file your taxes at the end of the year. This is important, of course, as that allows you to keep more of the income you bring in.

Downfalls of Per Diem

One benefit of per diem can also be considered a downfall -- the fact that it lowers your taxable income. As you reduce your taxable income, you'll also reduce the amount that you contribute to your Social Security, Medicare and unemployment benefits.
Per diem also won't be eligible for employer matching contributions to retirement plans such as a 401(k). If your company offers employer matching to these programs, this is valuable money that you could be giving up in the long run.
While paying less taxes in a year is obviously a good thing, having per diem could actually make it more difficult to get a loan. For instance, some independent truck drivers might face challenges getting a mortgage if they have a lower overall taxable income at the end of the year.
Finally, per diem can be a paperwork nightmare. Even if you don't have to submit receipts to receive your per diem on a reimbursement basis, it's important to keep proof of all the eligible expenses you incur in case accountants at your company or the IRS ask for you to submit proof.
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