Top Tax Strategies for Transportation, Distribution, and Logistics for 2025

The sooner you implement a tax strategy, the sooner you can start saving. With 2025 just under way, now is a good time to consider new tax strategies because if you enact them in the first quarter, you can enjoy the savings for most of the year. Some can also be used retroactively and could help with your 2024 taxes.

With a new president and Congress, some federal tax policies may change throughout the year. But using the information we know now — and while these are still on the books — here are some key tax strategies transportation, distribution, and logistics companies should consider for 2025.

Fuel and clean energy tax credits

There are a variety of fuel tax credits available to transportation and distribution companies. Fuel used in school buses, intercity or local buses, or for off-highway business (ex. forklifts, APUs, refrigeration) use can qualify for fuel tax credits. If you used alternative or other clean fuel last year, such as using propane in forklifts, you may also qualify for a tax credit or incentive. The Inflation Reduction Act (IRA) extended the following credits: 

• Alternative fuel and the alternative fuel mixture credit through December 31, 2024
• Biodiesel and renewable diesel credit through December 31, 2024
• Biodiesel mixture credit through December 31, 2024
• Second generation biofuel incentives through December 31, 2024
• Alternative fuel vehicle refueling property credit through December 31, 2032

There also are increased incentives for constructing green buildings, which can be especially beneficial to the distribution industry. President Trump has discussed possibly reducing some of the IRA benefits, so explore these options while they’re still available.

Accounting method changes

Most taxpayers can choose the overall accrual method of accounting, or the overall cash method of accounting, as well as how to account for specific items. These choices are typically made on the taxpayer's first return or in the year the taxpayer first must account for a specific item.

The IRS allows taxpayers to periodically change from one method to another or change the accounting treatment of specific items through automatic method changes, assuming the taxpayer qualifies. These accounting method changes can create the ability for taxpayers to defer income, accelerate tax deductions, or correct items that have been treated incorrectly.  

For transportation and distribution companies, these accounting method changes can create some nice opportunities. Some typical method changes transportation and distribution companies can take advantage of are:

• Overall cash method of accounting (available for companies with minimal inventory),
• Prepaid expenses,
• Depreciation expenses, and
• Timing of certain accrued expenses.

Cost segregation studies

If you purchased, constructed, or renovated one or more buildings in the last 10-15 years, you may benefit from a cost segregation study. A cost segregation study allows taxpayers to possibly reduce their taxes and increase cash flow by accelerating the depreciation on certain building components. With the continued decline in bonus depreciation benefits, cost segregation studies are an increasingly valuable strategy to save money on building renovations or purchases.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) offers tax credits for hiring individuals from specific groups, such as the long-term unemployed, SNAP recipients, veterans, or designated community residents. The credit amount can be substantial — reaching up to $9,600 per eligible new hire — contingent on the specific group the employee belongs to and the hours they work during their first year of employment.

R&D tax credit

If your company designed new products and processes or improved existing ones, you may qualify for the research and development tax credit. Transportation and distribution companies have been investing in technology, and it’s possible those investments could qualify for these credits. Claiming the R&D tax credit isn’t an easy process, but it can be a worthwhile one, as the credit directly reduces tax liability dollar-for-dollar, unlike deductions which only reduce taxable income. There are new reporting rules to know for this tax year. 

How CLA can help with tax strategies for transportation, distribution, and logistics

Our tax team can help you leverage these and more tax credits and incentives to help potentially lower your tax burden and enhance the return on your capital expenditures. Contact us to see what you might qualify for.