Common Questions about a Tax Home
Basic Concept:
When you maintain a primary dwelling like an home you own, rental or some arrangement where you are sharing a residence and work at a distant work site requiring a 2nd place of lodging, the 2nd residence receives special tax treatment because of the duplicating burden of maintaining 2 homes.
You have ongoing expenses for dwelling #1 You maintain a 2nd home at the distant work site.
Result = Company can provide tax free 2nd residence or give a tax free stipend due to your DUPLICATING living expenses.
IF the primary residence is a freebie ( e.g.: living with parents, using someone's address etc), not a dwelling (e.g. storage facility), below fair market rental value, or rented to another party, it will normally not qualify as a primary tax home. There must be a financial burden of 2 residences.
Variations
1) When a person spends > 6 months at home during the year and maintains a job, assignments away from home can qualify for tax free treatment even when the individual does not have significant expenses maintaining a home (i.e.. living with parents). In this case, the majority of time and the greater financial benefit are at home. Common examples of this are the seasonal worker or one that does occasional assignments
2) When a person has two or more jobs. The distant location can receive tax preference if the time and/or income is less than the main job.
Without a primary tax home, ALL housing whether provided
by the company or paid as an allowance is taxable income
Common Misconceptions:
1) A permanent residence and a tax residence are NOT the same. You can have a family home or legal residence in one place, but a tax residence in another
2) Your legal ties should match your tax home. Items like bank accounts, car licensing and registration, voter registration should be kept at the tax residence. You can use a PO Box or mail forwarding service from your tax home area is necessary.
3) A tax home is a metropolitan area, not a state.
4) A tax home is a dwelling, not a storage unit or an RV that goes with you on assignments
Related questions
Can I claim my relatives home as a tax home?
Only if you have substantial expenses contributing to the maintenance and upkeep of the dwelling. A rental from a relative must function as a normal rental. Make sure you have a contract, and pay fair market rent for the area. Since rent paid is rent received, the person renting the dwelling to you should claim the income on their tax return. An alternative is sharing the total cost of the residence. Make sure you maintain documentation for the monthly household costs and a paper trail of your contributions.
I keep my drivers license and bank accounts at my home and return there often to stay with my parents - my friends and/or recruiter tell me that that is sufficient for a tax home.
This is a permanent residence and not a tax home. Tax homes require duplication of living expenses unless you are at you parents home > 6 months of the year.
My recruiter tells me to use a different mailing address to use as a tax home so I can get the tax free housing. Is that OK?
Sounds like the recruiter is practicing taxation. The IRS would love a tape of your conversation
I own a home, can I rent it out and still claim it as my residence?
The general answer is no. By renting your home, you have contractually forfeited that dwelling to someone else and the home is considered a "business property" instead of a personal residence. You can still claim a rented residence as your tax home if you maintain a portion of it for yourself that is available to you 24/7 or you rent it on a sort term vacation basis, but the frequency of rental must be reasonable. Having a family member or other relative stay at the house paying nominal rent is an additional alternative. The key is the availability and use of the home by you.
Can I use a PO Box or Mailing Service?
It is fine to use a PO Box or mailing service, but try to use one close to your home area.
See what the IRS says about a Tax Home
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