Truck Driver Expenses: Overview, Deductions & Best Practices
The trucking industry is an expansive network, with an estimate of 3.5 million truckers in the United States alone. While some truck drivers are employed by a trucking company and receive income for each mile they cover, independent owner-operators have their own trucks and plan their own schedules.
The average annual income of a typical owner-operator is about $220,000 to $240,000 per year. However, this income is before deduction of operating and business expenses. An owner-operator must account for truck maintenance, fuel, tolls, insurance, provisions, taxes, licenses, permits, and more.
To ensure that your business is profitable as an owner-operator or a trucking company owner and that you have a healthy profit-to-expense ratio, it’s crucial to understand the different types of expenses and how much they can impact your take-home pay.
In this article, we’ll be covering all relevant truck driver expenses in detail and also provide important tips and tricks on how you’re able to reduce them.
Most Relevant Truck Driver Expenses
The first step to understanding your expenses is to learn about which expenses are fixed costs and which are variable. Fixed costs (also referred to as fixed expenses) are expenses that remain the same each month, such as truck insurance, health insurance, permits, truck loan repayments, leases, and similar types of expenses.
On the other hand, variable costs (also referred to as variable expenses) are expenses that depend on other factors and can fluctuate. Factors that influence variable expenses are how far you are driving, the type of freight you are moving, and how long you’re operating your truck. Provisions, fuel, toll, and maintenance costs are some examples of variable expenses.
Below, you’ll find a list of the most common fixed and variable expenses that a truck driver should account for:
Fuel is one of the biggest expenses of an owner-operator since they are estimated to spend around $50,000 to $70,000 on fuel alone. Semi-trucks in the United States get an average of about 5.5 to 6.5 miles per gallon.
It is important to compute your fuel cost per mile, in order to calculate how profitable your trip is going to be. To calculate how much you will be spending on fuel, consider the following calculation:
Total Fuel Cost = Fuel cost per gallon / average MPG (your truck’s average cost per mile) x total miles traveled
Certain routes have road tolls (also known as turnpikes), which are typically controlled access highways. These highways can be traveled by paying a fee (toll) in order to save time.
Toll roads are common in the United States (also in other countries) and usually provide a more direct route compared to off-highway routes. You will most likely find that paying tolls is more inexpensive than paying extra fuel costs.
Here are some useful resources that you can use to estimate your toll in the United States and Europe:
Truck maintenance and repairs are variable expenses for truck operators. Although you may be tempted to skimp on some expenses to save money, it is always better, in the long run, to keep your truck in optimal running condition to prevent running a massive repair bill.
Moreover, the Federal Motor Carrier Safety Administration (FMCSA) in the United States stipulates that commercial motor vehicles need to be operated safely and must be inspected at least once every 12 months according to the Minimum Periodic Inspection Standards.
To ensure you won’t be caught by surprise by maintenance bills, overestimate the amount you will need to cover them and set it aside in a separate account for later maintenance.
Also take note of tire expenses, which can range from $1,000 to $4,000, so you should opt for durable tires that will last longer and need fewer repairs. Similarly, always go for quality part replacements, even if they seem expensive, to avoid further expenses in the future.
Expenses for provisions should also be considered, especially for long-distance truckers that dine out. Expenses for provisions can easily amount to $30 – $50 daily.
Owner-operators receive a tax deduction per diem that allows them to deduct a portion of the drivers’ meals from their taxes. For example, the per diem rate from October 10, 2022, to September 30, 2022, was 80% of $69 daily, in the United States.
Some truck drivers opt for a small microwave (to get hot meals) and a refrigerator in their truck (to store drinks and food) and choose grocery stores for purchases to lower their expenses for provisions.
If an owner-operator or truck driver travels overnight, they may need somewhere to rest. Lodging costs can add up and become a significant expense for drivers on longer routes. These costs are also included in the per diem rate for truckers
However, it is best to minimize them by choosing inexpensive lodging options. Most semi trucks are equipped with a sleeper cab, which is a compartment that is attached to the back of the tractor unit and features a full-length bed (about 80 inches in length, which equates to just over 2 meters).
Taxes (corporate, road use, and fuel) are also a significant expense for an owner-operator or truck driver that should be paid every quarter. There is a 15.3% self-employment tax (12.4% for Social Security and 2.9% for Medicare) for owner-operators, and they are recommended to set aside 25% to 30% of weekly income for taxes.
By opting for deductions you qualify for, you can bring down your taxes, but you must be able to prove most of your expenses. You can do so by keeping receipts; however, you should note that not every expense is deductible.
It is best to consult a tax attorney before filing taxes each year. While company-employed truck drivers have their taxes withheld from their paychecks, owner-operators must file them on their own.
Some of the most common expenses that are deductible include repayments on truck loans, leases, fuel, business loan interest, DOT costs, truck repairs, insurance, and various others.
The truck you drive is bound to be your biggest expense as an owner-operator. Truck expenses depend on whether you are buying a truck or leasing it. When you are buying a used truck, you can expect to pay around $50,000 to $140,000 and around $80,000 to $200,000 for a new semi-truck.
Trucks can also be leased for drivers who don’t want to make a large initial investment. The monthly lease cost depends on the leasing company and the type of truck. Be sure to compare leasing companies to determine which one has the most suitable leasing terms available.
There are also lease-to-own options (also known as lease-purchase agreements) for truck drivers who wish to lease and eventually own the truck. However, it’s important to note that lease-to-own agreements typically require an initial down payment.
Insurance for a semi-truck costs about $3,000 to $5,000 annually. Some insurance premiums may also be higher, depending on the type of coverage that’s selected. You can expect to pay about 2 to 3 times as much if you operate under your own authority.
Occupational accidents, physical damage, and bobtail are typically insurance coverages that should be included. Aside from truck insurance, it is also important to purchase health insurance.
Licenses & Permits
Annual licensing and permits are also a part of your fixed expense list. These costs must be paid regularly according to the country or state that you operate in. License and permit costs include license renewal fees, business licenses, transport permits, registration fees, and vehicle inspections.
Owner-operators are expected to pay about $25 to $100 to renew a commercial driver’s license (CDL), $300 for the United States DOT Number, $100 to $600 for Heavy Vehicle Tax & Permit, $500 to $3,000 for International Registration Plan (IRP) plates, as well as other license and permit fees.
Please take note that some of these license and permit fees vary depending on the type of truck you operate and the state that your truck is registered in.
If you are a new owner-operator, you might need help with marketing, tax filing, managing freight broker fees, and bookkeeping. An owner-operator is estimated to pay 10% to 20% of the gross margin to a broker for every trip.
Similarly, you will also need to pay staff for administrative tasks or outsourced services such as accounting, bookkeeping, customer service, dispatching, and others.
Truck Driver Expenses Worksheet
We’ve compiled a list of expense worksheets for truck drivers (employed and owner-operators). Please visit the links below for more information:
- Trucker’s Income & Expense Worksheet
- Trucker’s Deductible Expenses Worksheet
- Truck Driver Expense Worksheet
Owner-Operator Truck Driver Salary After Expenses
A truck driver can expect a salary of $45,000 to $80,000 a year, considering the Hours of Service Regulations set by the Federal Motor Carrier Safety Administration (FMCSA) in the United States and after deducting all relevant expenses.
This means that an owner-operator’s expenses can amount to more than $150,000 keeping in mind that they are expected to gross between $220,000 and $240,000 before deducting expenses (fuel costs, insurance, taxes, etc.).
The amount an owner-operator takes home depends on multiple factors such as maintenance costs, fuel price fluctuations, freight broker costs (if they are involved), load board fees, and other fixed and variable expenses.
Tips to Reduce Truck Driving Expenses
When truck drivers reduce expenses, their net income increases. While most truckers assume that all fixed costs are inevitable, and only variable costs can be reduced, with advanced planning, selecting the right leases, and various other strategies, truck drivers are able to also reduce various types of fixed costs.
In this section, we’ll be taking a closer look at some of the best tips and tricks that you can apply to reduce your overall expenses as an employed trucker or an owner-operator.
- Do Due Diligence Before Buying/Leasing a Truck – Before choosing to buy or lease a truck, always research available options and what would best suit your needs. Before making your final decision, study the maintenance cost of each model you are considering, the required up-front capital, expected fuel costs, and also the type loan/lease type (purchasing vs leasing vs lease-to-own).
- Plan Meals Ahead – For longer trips, it’s best to plan your meals beforehand so that you can save time on the road and avoid spending on more expensive meals at restaurants or diners. If you’re on a budget you can always prepare your meals ahead of time and bring them along.
- Network With Shippers – Always maintain a good relationship with shippers since your networking skills may help you get a contract with a shipper without paying for a freight broker or load board. This will also increase your overall profitability and experience in the industry.
- Plan Your Route – Planning your route before a trip is crucial since it helps you understand your cost per mileage and your truck’s fuel consumption. It can also help you plan your lodging and meals beforehand and prevent extra costs. You’ll also be able to considerably lower your expenses by backhauling.
- Study Fuel Prices – Since there are a lot of factors that affect the price of fuel, always go for a lower base rate for fuel prices instead of a lower pump rate.
- Understanding Your Tax Deductions – Fully understanding tax deductions allows you to pay less tax. If you aren’t familiar with what type of expenses qualify, it’s best to consult an expert.
- Improve Fuel Efficiency – To improve fuel efficiency, you need to develop better driving habits and ensure that your trucks are adequately maintained. Avoid cutting corners, and always ensure your tires are in good shape before starting a trip.
Co-Founder & Writer
About the Author
Andrew is a multi-business owner with over 10 years of experience in the fields of logistics, manufacturing, operations, training, and education.
Being the co-founder of freightcourse has given him the ability to pursue his desire of educating others on manufacturing and supply chain topics.