Yes, per diem works very differently depending on whether you’re an owner-operator (independent contractor) or a company driver (W-2 employee). Understanding this distinction is critical, because using per diem the wrong way can lead to missed deductions or tax issues.

Per Diem for Owner-Operators and Independent Contractors

If you are self-employed, per diem is generally taken as a business deduction. When you are required to be away from your tax home overnight for work, you can deduct the IRS-approved per diem rate for each qualifying travel day.

This deduction reduces your taxable business income, which can lower both income tax and self-employment tax. One of the biggest advantages is simplicity. You do not need to save meal receipts, but you do need accurate records showing when and where you traveled and which nights you were away from home.

For many owner-operators, per diem becomes a key part of their overall tax strategy.

Per Diem for Company Drivers

If you are a company driver paid on a W-2, the rules are much more limited. Under current federal tax law, unreimbursed employee expenses are not deductible. This means you cannot simply claim per diem as a deduction on your personal tax return. However, some states allow you to claim per diem as a deduction. 

Why This Difference Matters

One of the most common mistakes drivers make is assuming per diem works the same for everyone. Owner-operators sometimes miss out on deductions they qualify for, while company drivers sometimes attempt to deduct per diem they are not allowed to claim.

Per diem can be a powerful tax benefit, but only when it’s applied correctly, which is why understanding how it works for your role is essential. If you have questions about per diem or want to make sure you’re using it correctly, reach out to an Abacus! professional.