Trucker Per Diem & The 10% Ownership-Related Party Rule
Trucker Per Diem & the 10% Ownership-Related Party Rule. Can an Owner-Operator claim trucker per diem under the related party rule if they own more than 10% of the company? Yes.
The 10% ownership - related party rule and per diem creates much confusion and is frequently misunderstood by both drivers and tax practitioners alike. Under the related party rule an Owner-Operator can claim substantiated meals & incidental expenses-only per diem even if they own 10% or more of the trucking company. Based on the foregoing the related party rule does not apply to the trucking industry.
Related Party Rule
- The 10% ownership-related party rule is intended to prohibit 10% owners and self-employed individuals from using per diem to claim lodging expenses. The rule is found in IRS Rev. Proc 2011-47 section 6.07 - Limitations & Special Rules
- Applies exclusively to per diem that includes lodging, meals & incidental expenses under Section 4.01 and 5 (High-Low Method).
- The related party rule does not apply to trucker per diem under Section 4.04 - Special Rules for Transportation Industry,
- Trucker per diem is a meals & incidentals expenses-only per diem.
- Furthermore, it is section 4.04 that allows an Owner-Operator to deduct 80% of per diem.
- The 80% limitation also applies to a motor carrier that offers a company-sponsored per diem plan
- The tax deductibility of per diem is limited to 50% for the other substantiated per diem options governed by Section 4.01 and 5 of Rev. Proc. 2011-47.
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Per Diem Substantiation Method - Special Rules for the Transportation Industry
Section 4.04 applies to:
- A payor that pays a per diem allowance only for meal and incidental expenses for travel away from home to an employee in the transportation industry and computes the amount under section 4.02, or
- A self-employed individual (owner-operator) in the transportation industry who computes the deductible amount for meal and incidental expenses for travel away from home under section 4.03.
Limitations and Special Rules
Section 6.07 applies to:
- Related parties.
- Sections 4.01 and 5 of this revenue procedure do not apply if a payor and an employee are related within the meaning of 267(b), but for this purpose the percentage of ownership interest referred to in 267(b)(2) is 10 percent.
- Section 4.01 and 5 are for per diem that includes lodging, meals and incidental expenses.
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About Per Diem Plus
Per Diem Plus is a proprietary mobile software application that was designed by truckers and built by tax pros. It is the only IRS-compliant mobile app for iOS and Android that automatically tracks each qualifying day of travel in the USA & Canada and replaces ELD backups (logbooks) to substantiate away-from-home travel.
About the Author
Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.
In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA
Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.
Copyright 2023 Mark Sullivan Consulting, PLLC; Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®