Renting your home while traveling, what is your home state?

bagladyrn, RN · Aug 10, 2008

Does anyone rent their home while traveling?
I'm thinking about renting my place next spring and getting a small apartment for my daughter in another state. My question is would the state with my house declare me a resident even though I am renting it to someone else? I don't want to pay taxes to this state if I'm not living there. I have no intention of working here either, but again, I don't want to pay taxes here if I'm not a resident.

Be aware that if you rent out your house you will lose your "tax home" status and therefore will be taxed(federal tax) on the cost of your housing, travel, etc. If you do not have a legal tax home, nothing is "tax-free".

astn · Aug 11, 2008

Be aware that if you rent out your house you will lose your "tax home" status and therefore will be taxed(federal tax) on the cost of your housing, travel, etc. If you do not have a legal tax home, nothing is "tax-free".

This is not (completely) true as tax law is way too complicated to make sweeping generalizations like the above.

Your domicile ("tax home" also often referred to as residency) is based on INTENTION and ACTION (and it's corollary, inaction.) Your domicile is wherever it was last until you make changes to that status. Normally speaking, this isn't something you think about, you simply move to a new location and that is your new domicile. For someone who is a professional vagabond, it becomes a lot more complicated of a problem.

If you are trying to RETAIN residency (and your 'domicile') somewhere, the most important part is to take NO action showing that you INTEND to live anywhere else. I have been a Pennsylvania resident for my entire life, yet I have spent about one year in the last decade in that state, but it was always my intent to return. I have maintained my Pennsylvania driver's license, registered all my vehicles in Pennsylvania, remained registered to vote there and voted via absentee ballot (when I remembered and cared.) I have always used that as my "permanent address" even if my "mailing address" was different, but I have made efforts to ensure that whoever was getting my address was aware of the difference. In that time I have spent over two years in Hawaii, almost a full year in Mexico, almost two years in Texas, and several months at a stretch in South Carolina, Connecticut, Florida, Louisiana, and in various other places. I have always, however, been a resident of Pennsylvania.

If you are trying to change your residency to somewhere else that you have not lived before, it becomes a bit more complicated, because many states aren't big on new "residents" who aren't planning on spending much time in their state. Most of the states people want to "move" to are also the no income tax states (or have various other advantages that you are looking for.) However, you aren't much use to them because usually they are making up for that income tax by sales tax or property tax--neither of which you are likely paying (and states don't need more freeloaders.) It is, however, possible, and I recommend looking at somewhere like Texas if that is your intention. See Escapees an organization more for RVers (who are people with problems strikingly like our own.) If you dig through their site, you will find a guide on 'how to become a Texan'. Those rules apply to most anywhere, but you have to be aware of some specific exceptions on a state-by-state case (for example, Wyoming, my future domicile, will only accept a "real address" not a post office box, while Texas is perfectly happy with you renting a PMB from the escapees and calling it "home.")

Finally and most importantly, don't get tax information (even from me) on the internet, unless you're reading it from the IRS itself. Talk to a tax professional because it's their job to read and understand these things. If you screw up on the basis of someone's advice or something you read on the internet, the government is going to teach you a valuable lesson about the IRS's unofficial motto ("We got what it takes to take what you got."). If your tax professional screws up, you go hire a tax attorney who will declare your tax professional incompetent and will allow you to settle up with the IRS with a lot less hassle (and theoretically for less.)

Austin

bagladyrn, RN · Aug 14, 2008

Agreed that talking to a tax professional is the best thing to do. Be sure though to talk to one who is experienced in working with travel professionals, not just a general tax accountant.

The rules governing travelers are different and really take a specialist to completely keep up on.

Keep in mind also that legal "residency" and a "tax home" are two completely different concepts - you may have one, but not qualify for the other.