"Tax" Home

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How is "tax home" accounted for? I've read a number of articles...I seem to "get it" than lose it. Is there a time when you cut ties with your current "tax home" and reside in another one? Is there a "policy" of sorts for doing such things?

1) Is it just better to keep my current state my "tax state"? even if I rent? I have no real ties to my state, other than supportive friends.

2) Is there a benefit from "moving" states before I start traveling? I think my idea would be to get a VA license and have a compact state license...could I do that while remaining in my current state with my current license? I am assuming I could because I have neighboring friends who have duel licenses and they live in one state and work in another (or both).

3) If I did this, I am assuming I would need to use a friend's address in that state? As oppose to a PO box...as I do not think you can have a DL with a PO Box? or a nursing license?

Thanks

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If you get audited for any reason, the IRS is going to examine your tax home closely if you accept tax-free money or take deductions for working away from home. Do you really live there? Do you have roots: friends, family, church, doctor, voter registration, drivers license, car registration? Do you return home regularly? Do you work there (not required but highly recommended if you are weak elsewhere)?

Where you want to live is a personal decision, but you will need a place to which you can return at anytime to lodgings. Prove rent or ownership, and not have rented it out while you are traveling.

Only if you have a permanent residence (different from a tax home) can you "own" a compact licensure. Yes, you can keep your current state license no matter your state of residence. If you are working with a clean slate, you might want to consider a state with no income tax. Both Texas and South Dakota have no income tax and are also compact states. South Dakota can be extremely cheap to buy a decent house and set up camp.

The requirement to actually live somewhere means a PO box won't work. It may work for a compact state license though, as long as you don't establish a permanent residence in another state.

There is nothing wrong with being itinerant (without a home) either. You won't be eligible for tax free housing, per diems, and travel, but you won't have to maintain a home either. Or worry about an IRS audit. I find that crunching the numbers works better for a well set up tax home (for example rent or buy a home and get a roommate to pay for most of the costs and check mail) versus itinerant, but your mileage may vary.

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So I would consider myself an itinerant traveler? As I probably won't come back to this state unless to visit, etc. My other question would be about my car...do I keep it with this current state? Or do I have to re-register it every 13ish weeks with whatever state I am in? That just seems like a PITA...

I spoke with a recruiter the other day and she was leaning towards me having a "tax home" somewhere...do I gather a traveler having a tax home would save the agency money? Not that would bother me because I want to do what is right and legal, not what would save someone money.

Thanks Ned.

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You need some sort of nexus. You don't have to go all the way to the standard of a tax home, but a permanent address will work for car registration and such, and get you a compact license.

Yes, a tax home saves money, that is how they can pay you more. Housing, per diems, and travel would not be subject to income taxes, but also not subject to FICA, workers comp, and unemployment - reducing those costs by about 10 percent over taxable reimbursements.

Whether it actually saves the agency money is up to interpretation. They are competing with many other agencies for travelers and have to pay a competitive wage and still make a fair profit themselves. Again, a limited pot (the bill rate) in which to pay for everything. If one agency quotes you pay based on a tax home, and another based on itinerant status, you will not likely be interested in working for the latter. So they have lost a competitive edge.

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I plan on being a travel nurse in a couple years. (Only two more semesters yay!) I want to get 1-2 years of experience under my belt. I have been doing my research, but can't find anything regarding changing your tax home. I currently live in WV, and plan on moving to Pennsylvania, no definite timeline on the date. I don't know if it would be better to change residences before I start traveling or after. I want to move back to PA to be closer to my family and multiple other reasons. Thank you

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Shifting your tax home deliberately is a rather advanced question (although I'm well versed in ways to do it when it is not desired), and I'd like to know the answer myself. Obviously people want to get lower cost housing or better located housing when they transition from staff to travel. This is where they get into trouble when their recruiter suggests "just use your parent's address" so they qualify for tax advantage from the agency perspective (not from the traveler or IRS perspective unfortunately). I can make a couple educated guesses as to the right way to approach it:

1. Working an open ended job (staff, per diem, registry), even for just a few days, at your new location will effectively shift your tax home. Document in your own notes the initial reason for the move, and any changes in circumstances to start traveling (useful in an audit years later).

2. Working at your tax home location in general is one of the three pillars of the IRS definition. While it is only required to meet two of the three requirements, working at home helps make your tax home solid. Of course, in many locations it is not possible to find suitable work.

3. This may muddy the waters for some readers looking for loopholes, but having historical ties to an area is specifically mentioned by the IRS. So is living with family (but not just an address of convenience). So moving back to an area where you previously lived, or having family in the area would help.

4. Purchasing a home seems like a solid way to help shift your tax home. In fact, renting and keeping proof that your are actively looking to purchase (emails to realtors or notes about conversations) could be very helpful. That is often the way people move legitimately, rent short term while they look to buy.

Tax homes are complicated as it often comes down to a preponderance of evidence which is very individual and circumstance based and often not black and white. It is probably to complex for there to be a simple answer, but the TravelTax site would be a good place to search. Failing that, I would call him or email him - he will give you good advice for free. I might suggest copying this post and emailing him, especially if any of these guesses fit your proposed circumstances. He knows me well, and usually we are very close on such matters. The difference is that he is an academically well prepared tax professional who is specialized on taxes for healthcare travelers, and I am not. Which brings up the point is on something this important, you need to check even the most solid sounding of advice that you find on the internet like perhaps this post!

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I reread your post (my reply was way overkill), and should add that your priority out of school should be a really great job, preferably one with a long internship at a major teaching hospital. If that happens to coincide with where you would like to be the center of a future traveling career, well great. But your career starts off with getting solid experience in your preferred specialty. Tax home issues for travel is down the road some distance. Good to think of them early, but this is premature.

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