Food trucks are often a great way for a person to earn the freedom of making their own money. However, it can be a major change for a person who has never done freelance taxes. Understanding these taxes is essential to surviving in the business.
Food Truck Sales Are Taxable
Anyone who makes over $400 in a year doing freelance work needs to pay income taxes. As a result, food truck owners are going to have to file and are likely to have to pay in every year. The amount will vary depending on a person's sales, but a typical estimate is about one quarter for every dollar that a person makes.
So if a food truck owner sells tamales for $4, that would be $1 in taxes. That is only a rough estimate that does not take into account sales taxes. This rate is typically a percentage, such as 20 percent of the sale. As a result, the food truck owner would take even more money out of their sale. In the example above, that would be a further 20 percent or 80 cents.
Why This Is The Case
In the same above, the food truck owner would have to take out $1.80 of their sales and would come away with a $2.20 profit on each tamale. Food truck owners are subject to these taxes because it falls under the heading of taxable income set forth by the IRS. For example, the income earned from a food truck could be considered business income.
However, owners who also solely operate their trucks would have to take into account tip income on each sale. Tip income of other workers, such as that earned by an employee who does not operate the business, would not affect the business' taxes. However, any tips the owner or owners earned while operating the business would be taxable for the business.
Cutting Your Costs With Deductions
When doing your taxes after the first year of running a food truck, it can be scary to see how much money you owe. However, there are many deductions that a food truck owner can make in order to save themselves a little money. For example, they can claim operation space in their truck and operating costs, such as buying food.
It is also possible to deduct gas and mileage spent while operating the food truck. This is particularly nice for trucks who travel a lot to make their sales. It is also possible to deduct many types of travel expenses, including traveling to a convention for food truck owners or to buy new tires or equipment for the truck.
If you are worried about making a costly mistake your first year as a food truck owner, don't hesitate to contact a professional tax service. They can do your taxes quickly and efficiently and avoid frustrating or even costly expenses.