Tax home

NedRN · Aug 21, 2014

One central component of a tax home is you have to be living in it. Are you?

averysrnmom · Aug 21, 2014

If I go back to NC I would be. If we go home for a few days between assignments its where we'd stay. Is that what you mean?

averysrnmom · Aug 21, 2014

I lived in our rental home in NC from Jan-June this year when I was staff.

NedRN · Aug 21, 2014

If I go back to NC I would be. If we go home for a few days between assignments its where we'd stay. Is that what you mean?

You can stay in a motel for a few days in between assignments too. That is not a tax home.

"If we go home"; "Do I have to pay rent?"; PO box; rented home same time you started traveling; nominal rent for a place you don't live in and have no intention of returning regularly.

If you get audited, the weight of evidence is that you do not have a tax home. You can't "establish" a tax home and forget it, you have to have a preponderance of evidence that it is current. Among other things, that you have expenses there, return regularly (as anyone who actually lives in a place would do), strong local ties like a personal physician, and so on. There are a number of other issues that can break your desired tax home, for example working in the same general area over 12 months in any 24 month period will shift our tax home to that new location. Continuing to work every year at your tax home can help strengthen its status when it is otherwise weak (which is what I would call your situation).

I would read some of the many articles on tax homes on PanTravelers or TravelTax sites to learn further. You might want to consult with TravelTax on your options, and crunch some numbers for itinerant status versus tax home to see if one fits your style and finances. Your "rental" home has some potential as apparently you may be allowed to rent it seasonally (not year round) and still claim it as your tax home.

Another big picture to consider is your risk of getting "caught". It is low, but travelers do get caught every year in numbers, so it is a real risk. Generally you would have to be audited for some other issue and then the tax home issue comes up when the IRS discovers you are a traveler.

You are already at a higher risk of being audited as I'm sure you itemize with your rental property. But the risks of back taxes, penalties, and interest would probably be life changing if you do get caught, potentially in six figures after just three years of traveling. There is also a small risk of criminal charges if you are charged with deliberate tax evasion. Evidence gathered in a criminal investigation would include bank statements, credit card history, and even social media such as this forum. Very low risk, but not worth it in my opinion. Do things as legally as possible (always a continuum when talking about taxes) so you can sleep at night.

Here is another big picture item for you: generally most travelers will net about $10,000 a year more from having a valid tax home. Against that 10K, you have to look at expenses of keeping a tax home. That would include rent, mortgage, or property taxes, maintenance of that property, utilities, and the cost of returning home. For many travelers, their existing home would exceed that cost and being itinerant and not having to worry about anything makes for a better quality of life. I believe TravelTax even has an article on the joys of being itinerant (which may also appear on PanTravelers if I'm not mistaken).

There are ways to significantly lower the cost of maintaining a tax home, and the more money you have (or credit), the better you might be able to manage it. My favorite "loophole" to suggest is to buy a home (again that you actually live in and that forms a nexus for your travels), and get a roommate. This may cover a large portion of the mortgage, someone to look after your property and sort your mail, and you are building equity and even have a chance for appreciation. That is also a foundation for a solid tax home that is unlikely to be challenged.

averysrnmom · Aug 21, 2014

Maybe I wasn't clear in my previous posts... I've lived in NC my entire life up until now in the same town. I do have a physician at home in NC and all of our family is there. This was our permanent home. My house was a house that I rented (not owned), but it was our permanent address (not a vacation home). My in-laws are keeping a fair amount of our furniture at their house. If I lost my contract today, their house is where we'd go home to. I'm sure we will go home periodically...although for 2014 is it necessary since we lived in NC for 6 months out of this year? I don't think it's feasible for me to keep a PRN job there. If I have a signed lease contract and I pay my in-laws monthly for a room in their home, is that a tax home?

I did go to Travel Tax and read a lot. I think I'm prob going to use them for my taxes this year.

NedRN · Aug 21, 2014

If you are going to use TravelTax, have a chat with him about your tax home - that is part of his service so he won't charge you extra. He will want it down right to do your taxes, very much the straight error. He won't do them unless he feels he can also defend you successfully if you are audited.