Trucking industry adds 5,100 jobs in December

A report released by the Labor Department on January 6 stated that 200,00 jobs were added in December, and that 5,100 of these were created in the trucking industry. While this may seem to indicate that things are going well for companies involved in this method of transportation, the data could be misleading. Trucking firms are faced with many challenges, but fortunately they have tools to help them cope.

Trucking employment rose 40,100 from December of 2010, according to Truckers News. Payroll employment in the industry has has risen by 68,800 jobs, or 5.6 percent, since the trucking job market hit its recent low in March 2010.

Although the increase in payrolls could be evidence that the trucking industry is improving, it could simply be the result of companies hiring more workers to cope with the recent changes to the hours of service regulations. These laws were recently adjusted by the U.S. Department of Transportation's Federal Motor Carrier Safety Administration (FMCSA) to constrain the hours worked by drivers.

In the statement announcing the changes, the regulatory body stated that the new laws were designed to constrain the ability of drivers to work hours that are either at the legal limit or slightly below that number. The FMCSA stated that driving too many hours has been linked to accidents and tired commercial operators. It added that taking on a driving load of this nature could create chronic health problems.

When the new hours of service regulations were approved by the FMCSA, many market experts voiced their concerns that the new regulations could drive up costs for companies in the trucking industry by forcing the firms to hire additional workers to do the same amount of work. This additional cost pressure would add to the various challenges that companies in these space are facing currently.

Although these firms are faced various challenges in the current economic climate, they do have some tools they can utilize to lower their business costs and increase their chance of survival. Trucking firms can compensate for these cost pressures by utilizing 1031 exchanges to realize tax benefits when replacing their worn-out commercial motor vehicles (CMVs). Making the choice to use such a tool can mean the difference between success and bankruptcy for many companies.

Although participating in a 1031 exchange offers the user with many benefits, the primary perk of setting up one of these transactions with a qualified intermediary such as Strategic Property Exchanges, LLC is deferral of taxation. While replacing equipment, a truck owner can avoid paying taxes on the sale of CMVs if the proceeds are invested into replacement automobiles in a manner that qualifies the transaction as a like-kind exchange. Alleviating this tax burden allows the seller of the vehicle to retain the equity held in the piece of equipment.

The monetary benefits that can be derived from keeping this equity are easily exemplified by exploring how they can lower debt payments. These payments are made out of operating income, which can be taxed at rates as high as 40 percent. Therefore, lowering debt payments reduces a company's tax burden. Reducing the amount of debt needed to purchase a replacement vehicle will also decrease interest costs.

A company that needs its CMV for operations can opt for a reverse 1031 exchange, which would permit it to purchase the replacement automobile and then sell the original vehicle at a later time.

One additional benefit of setting up 1031 exchanges with qualified intermediaries is that there is no limit on the number of times they can be used. A company that owns commercial vehicles can set up these transactions whenever its equipment needs to be replaced.