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How the New Tax Law Affects Auto Transport

Published by Joe Webster.

What's in this article?
  1. This is How the New Tax Law Affects Auto Transport
  2. 2% Itemized Deductions Are No Longer
  3. Trade-Ins Aren't Tax Free
  4. Pass-Through Businesses Are Eligible For A New Deduction
  5. A Flat Corporate Tax Rate
  6. Bonus Depreciation is Improved
Auto Transport Drivers Working For A Company

This is How the New Tax Law Affects Auto Transport

Recently, as you certainly know by now, the Federal government passed a sweeping new tax overhaul, which consisted of the largest changes made since the Tax Reform Act of 1986. Known as the "Tax Cuts and Jobs Act (or TCJA)," it was signed into legislation by President Donald Trump on December 22, 2017.

Regardless of how you feel about its merits, it's important to know how it affects the auto transport industry, as the reality is that this tax reform is here to stay for the foreseeable future.

While it would be too much to go over every little detail of the changes that have been put in place, here's an overview of some of the main changes that affect the auto transport industry:

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2% Itemized Deductions Are No Longer

Up until now, truck drivers, such as auto transport drivers working for a company, could claim their un-reimbursed expenses as itemized deductions. However, as of January 1, 2018, they can no longer do so. This means that it's up to the employer to provide a per diem to each auto transport driver or to reimburse them for their expenses internally.

Normal Tax Rates

Trade-Ins Aren't Tax Free

Yet another change is that, starting this year, when tractor or trailers are traded in for a new tractor or trailer from a dealer, it's no longer tax-free. This is because Section 1031 explicitly states that personal tangible property that is exchanged will not be considered as having tax-free eligibility. (See: https://www.ipx1031.com/1031-tax-reform-updates/)

Pass-Through Businesses Are Eligible For A New Deduction

Up until the passing of the Tax Cuts and Jobs Act, pass-through businesses entities had their net taxable income taxed based on the owners's normal tax rates. Pass-through business entities in the auto transport industry can consist of:

  • S Corporations;
  • LLCs;
  • Sole Proprietorships;

An owner-operator, such as an family-operated auto transport carrier, is considered a pass-through business entity. Under the new tax law, they are now eligible for a new deduction based upon the qualified business income, also known as QBI, of the owner. The amount of the deduction is around 20% of the owner's qualified business income.

A Flat Corporate Tax Rate

For auto transport owners that have structured their company as a C corporation, the new tax law is a major positive. That's because the TCJA has created a flat corporate tax rate for C corporations at just 21%. Prior to this tax reform, the corporate tax rate was 15% for income between $0-$50,000, 25% for income between $50,001-$75,000; 34% for income between $75,001-$10 million; and, finally, 35% for income that's greater than $10 million.

Complicated Tax Law

Bonus Depreciation is Improved

Even yet another thing to note is that bonus depreciation has also been made better for businesses under the TCJA. Now, any qualified purchases made after September 27, 2017 will see their bonus depreciation for the first year increase from 50% to 100%. Furthermore, while this was not the case pre-TCJA, tractors and trailers that are used are also eligible for the bonus depreciation.

Given how complicated tax law can be, there are numerous other changes in the Tax Cuts and Jobs Act that can affect the auto transport industry as a whole and those who operate within it. It will all depend on your own particular circumstances. If you need more information on the TCJA, you can visit the IRS's website at https://www.irs.gov/newsroom/tax-reform.

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Joe Webster always knew the auto transport industry would be a great career option. And with decades of experience, Joe is now an established consultant for A1 Auto Transport.

Joe was born in Santa Cruz, California. During high school, Joe worked as a mechanic; a job continued to work part-time during his bachelor's degree.

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A-1 Auto Transport is a disclosed agent for the following shipping companies:

CSI Logistics
435 Division Street
Elizabeth, NJ 07201
FMC 22206
Intl Cargo
45 Campus Drive
Edison, NJ 08837
NO. 17858N
Trans Global Auto Logistics, Inc.
3401 E Randol Mill Rd,
Arlington, TX 76011
NO. 018191NF
CFR Rinkens
15501 Texaco Avenue
Paramount, CA 90723
NO. 013055NF
ABC Worldwide LLC
2840 NW 2nd Ave #105
Boca Raton, FL 33431
NO. 025472F
ShipYourCarNow LLC
1160 South Rogers Circle Suite 1
Boca Raton, FL 33487
NO. 025646
Merco Air & Ocean Cargo, Inc.
6 Fir Way
Cooper City, FL 33026
NO. 021869F
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