Tax Home

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vzappi39
Posts: 1
Joined: Thu Aug 19, 2010 6:21 am

Tax Home

Unread post by vzappi39 » Sat Nov 27, 2010 10:55 am

I just had a quesion about claiming a "tax home". In your experience, is it worth it tax-wise? I'm just worried that I'm going to get screwed later with my taxes. I would appreciate any input. Thanks!

KtVi
Posts: 9
Joined: Fri Nov 13, 2009 7:59 pm
Location: USA

Re: Tax Home

Unread post by KtVi » Fri Dec 03, 2010 10:06 pm

"I just had a quesion about claiming a "tax home". In your experience, is it worth it tax-wise? I'm just worried that I'm going to get screwed later with my taxes. I would appreciate any input. Thanks!"

Great question. First of all, claiming a "tax home" is one of the most confusing topics for new or even seasoned traveling professionals. There are multiple definitions of "tax home" depending on who you ask, and each company has its own opinion and advice. In our experience, and this includes dealing with a tax professional who used to be a traveler, if you want to survive an IRS audit, you'd better complete your taxes properly. In short, if you own a property that you are leaving to be a traveler and you are maintaining that property while you are working away from that area (50-60 miles is the standard minimum distance according to some sources), that will be considered your "tax home." In that case, you would be eligible to receive tax free housing benefits and per diem from the contract agency. If you do not own property or your property is rented out full time, legally you are not eligible for the tax benefits such as housing or per diem from the contract agencies. This can be a huge difference in pay, but it will save you from a very stressful audit later on. I am certainly not an expert on tax law, so I urge you to consult with your tax professional or contact us for further resources.
Kate L. Violette, PT, DPT, OCS, CSCS

traveltax
Posts: 5
Joined: Tue Jan 04, 2011 9:11 pm
Contact:

Re: Tax Home

Unread post by traveltax » Tue Jan 04, 2011 9:59 pm

vzappi39 wrote:
> I just had a quesion about claiming a "tax home". In your
> experience, is it worth it tax-wise? I'm just worried that I'm going to get
> screwed later with my taxes. I would appreciate any input. Thanks!

Maintaining a tax home can be a double-edged sword. While there is significant tax savings to derieved from receiving the lodging, meal, and travel allowances on a tax-free basis, the expense and effort required to maintain the home can far exceed the benefits from keeping it.

A "tax home" can generate a lot of confusion. A tax residence and a permanent residence are not the same thing and they were separately determined even though they are often at the same place. A tax home by definition is the place you earn your income, not where you live. If you have more than one job at a given time, then your tax home will be the place where you derive the majority of your income. A tax residence is simply a point of reference to determine from where you have deductible or reimbursable travel, lodging, and meal expenses.

Travelers qualify for a tax home based on an exception to the rules I outlined above. This exception is carved out for individuals who are engaging in temporary assignments away from their home, and/or are in constant motion in terms of the location of their jobs. This exception to the rules requires that you meet two out of three of the following criteria:
1) whether you have income at home
2) whether you have substantial expenses maintaining a primary dwelling that you use for your own lodging
3) whether you have abandoned the area of your historic home

If you meet all three criteria, then the location of your permanent home is also your tax home. If you meet two out of three of these criteria (which is what most travelers do) then your primary home can still be considered your tax home given that the remaining facts and circumstances of your situation also support this. Of course, if you only meet one or none of these criteria, your tax home is wherever you work.

Our website has a wealth of information concerning this and you may want to avail yourself of our free workshops/seminars that we provide.
Joseph Smith EA
Enrolled Agent, Admitted to Practice Before the IRS
TravelTax LLC
www.traveltax.com
jsmith@traveltax.com

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