Preliminary data based on over 3,000 tax returns indicate that the Tax Cuts and Jobs Act had an overall positive impact on owner-operators in the trucking industry.
ATBS has observed the following statistics related to how owner-operators fared on 2018 taxes.
First, the average owner-operator’s taxable adjusted gross income (AGI) went from $43,093 in 2017 to $52,180 in 2018. This was an increase of $9,087 or 21%. The increase was predominantly related to a booming year in the transportation industry.
During the same time, the average owner-operator total tax liability went from $8,242 (2017) to
$9,284 (2018). This was a smaller increase of $1,042 or 12.6%. The overall effective tax rate for owner-operators went from 19.1% (2017) to 17.8% (2018) or a reduction of 1.3%. The net result is that owner-operator taxable income increased 21% while actual tax liability increased only 12.6%.
Following are some of the specific reasons for the reduction in owner-operator tax liability.
- 68% of ATBS owner-operator clients took advantage of the qualified business income deduction with an average of $6,235 being deducted from their tax liability. This was a new deduction for 2018 as a result of the Tax Cuts and Jobs Act.
- The average client’s standard deduction went from $9,439 to $18,862. The number of drivers filing the standard deduction increased from 71% to 94%. The Tax Cuts and Jobs Act essentially doubled the standard deduction for most tax filers.
- The average owner-operator depreciation deduction increased from $17,072 (2017) to $20,965 (2018). The significant increase in depreciation was a result of the Tax Cuts and Jobs Act allowing faster depreciation methods than prior years.
The only negative consequence of 2018 taxes, according to ATBS, was the number of drivers that paid the Affordable Care Act’s individual mandate penalty. 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.
Overall, statistics from ATBS show that owner-operator clients enjoyed a mostly positive impact from the changes that came with the Tax Cuts and Jobs Act.