Owner-operator taxes: the rules for a driver in business for themselves

Once the law treats you as being in business for yourself rather than as an employee, you are reading a different rulebook: business expenses, the truck as an asset, and a tax on self-employment earnings that a W-2 driver never sees.

Owning your truck, leasing it, or running it under a lease-purchase describes your equipment. It is a separate question from whether you are an employee or in business for yourself, so we keep the two apart instead of guessing one from the other.

What the rules say

Being in business for yourself

The IRS treats worker status as a question of fact determined under common-law rules, and it publishes guidance distinguishing an independent contractor from an employee.

Running costs

26 U.S.C. § 162(a) allows a deduction only for the ordinary and necessary expenses paid or incurred in carrying on a trade or business, and 26 C.F.R. § 1.162-1 describes those expenses as directly connected with or pertaining to the trade or business.

26 U.S.C. § 262 denies a deduction for personal, living or family expenses except as expressly provided, so an outlay connected with an occupation is not deductible merely because the occupation requires being away from a residence.

26 C.F.R. § 1.162-4 permits a deduction for amounts paid for repairs and maintenance to tangible property only where those amounts are not otherwise required to be capitalized.

How the truck's own costs are handled

The standard mileage rate is not available for a heavy tractor. Where a driver sees a cents-per-mile figure in the news, that figure is for cars and light vehicles, so a tractor's costs are handled through actual expenses and the cost-recovery rules instead.

26 U.S.C. §§ 167 and 168 provide the depreciation and cost-recovery rules for property used in a trade or business, and 26 U.S.C. § 179 provides an election to expense certain depreciable business assets.

Publication 946 states a maximum section 179 expense deduction for tax years beginning in 2025 and a property-cost level above which that maximum is reduced.

26 U.S.C. § 263 denies a deduction for amounts paid for permanent improvements or betterments that increase the value of property, so the form in which equipment is acquired determines whether an outlay is recovered through the cost-recovery rules or deducted currently.

Section 70301 of Public Law 119-21 amended the additional first-year depreciation allowance of 26 U.S.C. § 168(k) and applies its amendments to property acquired after January 19, 2025, and section 70306 amended the section 179 dollar limitations for property placed in service in taxable years beginning after December 31, 2024.

Self-employment tax

26 U.S.C. § 1401 imposes a tax on self-employment income, and the IRS directs sole proprietors to report business profit or loss on Schedule C (Form 1040).

26 U.S.C. § 1402(a) defines net earnings from self-employment as gross income derived from a trade or business carried on by the individual less the deductions attributable to that trade or business, so allowable business expenses reduce the base on which the tax is imposed.

26 U.S.C. § 164(f) allows an individual a deduction equal to one-half of the taxes imposed by 26 U.S.C. § 1401, other than the taxes imposed by § 1401(b)(2), for the taxable year.

Where the numbers get reported

The IRS directs a sole proprietor to report profit or loss from a business on Schedule C (Form 1040), and Publication 583 describes the records a business is expected to keep to support the items reported.

Health coverage and retirement

26 U.S.C. § 162(l) allows a deduction for amounts paid for insurance constituting medical care for the taxpayer, spouse, dependents and certain children, in the case of a taxpayer who is an employee within the meaning of 26 U.S.C. § 401(c)(1), and limits the deduction to the earned income derived from the trade or business with respect to which the plan is established.

The IRS describes retirement arrangements available to self-employed individuals, and Publication 560 sets out the plan types, participation conditions and contribution deadlines for a small business; no contribution figure is encoded in this project.

What we are not saying here

Where this comes from

Every rule stated on this page comes from the law, the regulations, or IRS guidance, and each one is linked so it can be read directly.

Still being read

These are questions on this page we have not finished reading the authority for. We list them rather than fill the space with a guess.

Where to go next

How we research this

Nothing here works out an amount for one person. It explains which rules apply so a driver knows what they are looking at, and what to bring to whoever prepares the return.

This page is educational. It is not tax advice, and it is not a determination about any one driver's return. A tax professional who can see the whole situation is the right person to apply these rules to it.