What is a Tax Home?
If you are reading this, you are most likely a working traveler, constantly on the road, and you rarely work in the same area consistently. If you do not have a regular location where you earn income, you may need a little help determining exactly where your tax home starts and ends. Luckily, there are laws built into the tax code that lay it all out. Here are the three main rules to keep in mind:
You perform part of your business in the area of your main home, and use that home for lodging while doing business in the area (a job).
You have living expenses at your main home that you duplicate because your business requires you to be away from that home.
You have not abandoned the area in which both your historical place of lodging and your claimed main home are located. For example, you have a member or members of your family living at your main home, OR you often use that home for lodging.
If you satisfy all three factors, your tax home is the home where you regularly live. If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. If you satisfy only one factor, you are itinerant (your tax home is wherever you work, and you cannot deduct travel expenses or receive tax-free housing and meal stipends). -IRS Pub 463
As an itinerant (a.k.a. transient), a traveler cannot receive per diems, stipends, or travel money as tax-free because they are not considered to be traveling away from home. What they receive in these categories needs to be added back as taxable income on their tax return, or the company can do it for them and include it in their W2 wages.
It is important to note that the only unquestionable tax home maintains ALL THREE requirements, not just two. Some other things to keep in mind are the myth of “The 50 Mile Rule” and how to reestablish your tax home in case you do end up living in a new location for more than 12 months. Also, check out this page to make sure you’re not confusing a tax home with a permanent residence. There’s a difference!
Check out this helpful video that goes into a little more detail, and please don’t hesitate to reach out if you have concerns about satisfying any of these requirements.
