Overdrive Magazine

July 2019

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22 | Overdrive | July 2019 BY JAMES JAILLET Owner-operators paid slightly more overall in income tax for 2018, though their effective tax rate dipped slightly, thanks to new income deductions and equipment deprecia- tion rules. The conclusion comes from analysis of tax returns provided by owner-operator business services provider ATBS. The firm last month released analysis of its clients' tax filings for 2018 — the first year under reforms instituted by 2017's Tax Cuts and Jobs Act. Owner-operators paid just more than $1,000 more on average in income tax in 2018 compared to 2017, but that was due mostly to a major increase in taxable wages. The effective income tax rate for owner-operator clients of ATBS, the country's largest owner-operator ser- vices firm, dipped by 1.3 percentage points last year, from 19.1% in 2017 to 17.8% for 2018. Average taxable adjusted gross income of ATBS clients rose from an average of $43,093 in 2017 to $52,180 in 2018. That 21% jump reflects the year's high freight demand and record-high rates. Those stronger earnings led to an increase in average tax bills, though at a much lower rate, 12.6%, than the increase in wages. The average tax liability was $8,242 in 2017, $9,284 in 2018. ATBS' findings – that owner-oper- ators generally fared better under the new tax code than the prior – is in line with forecasts when the law was passed. Analysts then predicted an average savings of about $2,000 for owner-operators. ATBS' figures are based on preliminary data from 3,000 tax returns. The firm works with about 15,000 owner-operators. ATBS says two-thirds of its clients took the new Qualified Business Income deduction for 2018. That deduction reduced taxable income by an average $6,325 for its clients. The deduction, which took effect last year under the new tax law, allows pass- through entities – such as LLCs, sole proprietorships and S corporations – to deduct 20% of their income from their taxable wages. Also, the higher standard deduc- tion afforded by the 2017 tax over- haul led ATBS clients to deduct an average of $18,862 — up from $9,439 the year prior. The law also cut rates in all tax brackets. "The only negative consequence of 2018 taxes was the number of drivers that paid the Affordable Care Act's individual mandate pen- alty," ATBS said in its report. "In 2018, 28% of ATBS clients paid the penalty with an average penalty amount of $1,027. However, this mandate will no longer be in effect for 2019 taxes." B U S I N E S S Partners in Business tip: Shop for a truck loan The Partners in Business program, produced by Overdrive and financial services provider ATBS, is sponsored by TBS Factoring Service. ATBS will present two daily Partners in Business one-hour ses- sions Aug. 23 and Aug. 24 at the Great American Trucking Show in Dallas. You can negotiate truck loan rates, so don't take the first deal you're offered. A percentage point or two could mean the dif- ference of thousands of dollars in interest costs over the life of a loan. Your rate will be determined largely by your credit history and the stability of your job history and residential locations. The new equipment depreciation schedule, which allows owner-operators to deduct the price of equipment in full in the year it's bought, helped cut truckers' tax liability. The average depreciation deduction for ATBS clients rose to $20,965, up from $17,072 the year prior. Earnings strong, but tax rate lower for 2018 Todd Dills

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