Tax Planning & Fuel Taxes: What Independent Truck Drivers Need to Know
With Kentucky’s updated fuel tax rates taking effect July 1, 2025, many drivers wonder how this will impact their bottom line. For owner-operators, here’s how to think about it from a tax planning perspective:
Fuel Taxes Are 100% Deductible
Fuel expenses – including the state excise tax, environmental fee, and the federal diesel tax ($0.24/gal) – are fully deductible as part of your operating expenses.
Tip: Keep clear, itemized fuel receipts. Apps like TruckerPath can help automate this tracking.
Use IFTA To Your Advantage
Under the International Fuel Tax Agreement, drivers pay tax based on where they drive, not where they buy fuel. This means:
If you buy fuel in Kentucky but drive more miles in Tennessee (which has a lower rate), you may get a refund
If you underpay in higher-tax states, you’ll owe the difference
Tip: File quarterly IFTA returns on time. If you run across multiple states, proper tracking can lead to surprising savings.
Fuel Surcharges = Smart Cash Flow
Charging customers a fuel surcharge isn’t just about covering costs – it can also:
Help preserve your net margin when prices or taxes rise
Serve as a hedging strategy against future tax increases
Make your pricing transparent and adaptable
Tip: Use the U.S. Department of Energy’s weekly fuel index to justify your surcharge in contracts or rate sheets.
Don’t Forget Depreciation & Per Diem
While fuel is a major cost, smart tax planning means considering:
Truck depreciation – Section179 or bonus depreciation
Per Diem deductions – meals/lodging if you’re over the road
Maintenance costs, tolls, and license fees
Tip: Pair fuel planning with a holistic expense strategy and check in with a CPA who understands transportation.
Bottom Line
Fuel taxes don’t have to erode profit. With planning, tracking, and pricing built around real costs, truckers can pass them through, deduct them, and even recover some. Let the government pay you back at tax time.