Ah, the ever illusive tax home. While some may say that the words tax home are the stuff their nightmares are made of, we say that the words tax home, and all that comes with them, are the stuff of our dreams!

That’s right! We love tax homes because once you break it down, you realize it is the key to the benefits of being a travel therapist!

We were just like you as new grads and anytime we heard tax homes being brought up, our minds immediately flashed back to images of fictional monsters hiding under our beds waiting to steal us away! The reality was that once you turned the lights on, you realized the monster was never there.

In this article, we hope to flip that light switch so that you don’t have to be scared of Tax Homes anymore!

(PLEASE NOTE, WE ARE NOT TAX PROFESSIONALS. WE ARE ONLY SHARING OUR EXPERIENCE AS TRAVEL THERAPISTS. WHEN MAKING YOUR OWN DECISIONS, PLEASE DO YOUR OWN RESEARCH AND CONSULT WITH YOUR TRUSTED TAX PROFESSIONALS OR THE TEAM AT TRAVELTAX.COM)

LETS JUMP INTO IT

We’ll start with the definition of tax homes by the IRS:

“Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. {…} Having a "tax home" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes.”¹

Great, you’re probably more confused now. Don’t worry, we’ll get there!

FIRST,

WHY IS IT IMPORTANT TO MAINTAIN A TAX HOME?

As a traveling therapist, slp, or nurse you have this awesome opportunity to take advantage of tax free income! You can read a bit more about the structure of a traveler’s pay package here if this is the first time you are hearing about tax free income. However, I’m sure you’ve heard travelers talk about their stipends or per diems for lodging and for meals. This is the portion of your income that comes to you tax free. The only way you become eligible to legally obtain this tax free income is if you are MAINTAINING YOUR TAX HOME.

SO, DO YOU HAVE TO HAVE A TAX HOME?

No, you are not required to maintain a tax home as a traveler, however your technical descriptor as an employee would switch from a contract worker to an itinerant worker and you would not legally be allowed to accept tax free stipends. Most travelers want to remain a contract worker because it allows you to keep a greater percentage of your paycheck in your pocket! Who wouldn’t want that???

CAN THIS REALLY BE LEGAL?

You might be thinking this sounds a little fishy….. we’re talking about paying LESS taxes after all. But yes! Yes, this is legal. This is put in place by the government to provide tax breaks on housing and food costs for workers like electricians, pilots, and healthcare workers while they are away from their tax home. This might be a short 2-3 night hotel stay for a pilot or it could be for healthcare workers on contract in another state for 13 weeks.

SECOND,

Now you get why you want to maintain a tax home, but how do you do it? According to the IRS, you need to meet 2 out of 3 of these requirements.

You must:

1. Perform part of your business in the area of your main home and use that home for lodging while doing business in the area.
2. Have living expenses at your main home that you duplicate because your business requires you to be away from that home.
3. Have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home, OR you often use that home for lodging.²

To offer a rough translation, you must:

Have a job near your permanent home; Maintain regular business in your tax home area which includes employment, car registered, registered voter, driver license, etc.
Have a permanent or physical residence in the area that you continue to upkeep like mortgage, rent, repairs, and taxes while away from the tax home.
Don’t abandon the tax home and return there 30 days out of the year.

Often times travelers meet requirements two and three

In our case, we meet requirement number two by renting a room for market value from Ryan’s parents. This shows that we have duplicate living expenses. We pay rent for a room in our tax home, and we pay rent for a place to stay on contract. We meet requirement number three by returning to our tax home 30 days out of the year. This does not have to be 30 consecutive days.

CAN I JUST WRITE DOWN AN ADDRESS FOR MY TAX HOME?

So, if you are still wondering if you can just write down your parents or some other family member’s address as your tax home without having any of these other things in place, the answer is no. There has to be financial responsibility attached to your tax home.

DO I HAVE TO TURN IN PROOF OF MAINTAINING MY TAX HOME EACH YEAR TO THE IRS?

Good news! You don’t have to turn in proof of your tax home, potentially ever. The only time you have to supply proof of maintaining your tax home is if you get audited by the IRS. That means you do have to keep records of maintaining your tax home in case this happens. The IRS is allowed to audit many years in the past, so this means you want to keep your records for quite some time. It also means if you are unable to prove that you have maintained a tax home, but have been earning tax free stipends, you’ll have to pay back taxes and penalties.

THIRD,

WHAT ARE THE RECOMMENDED RECORDS YOU SHOULD KEEP?

Tax Home
- Your lease agreement signed by all the parties involved (when renting)
- Listings of similar room rental rates in the area in order to determine a fair market price for your rental (updated each year)
- Images/records of checks sent for rent or your mortgage payment for your tax home
Days at Tax Home
- Record receipts from items purchased in tax home (receipt will have location, date, and your credit card info)
Contract Expenses
- Keep copies of all travel assignment contracts to prove you were away from your tax home for work
- Record of your miles from one contract to the other to prove you had to spend money to travel to your new job
  - Go to google maps, print out the mileage map from point A to point B. Transportation reimbursements are not per diems and we must prove that we used that money via gas, hotel stays, plane tickets, etc. to get to our next job
  - Rent for housing at contract location

AS A SPECIAL GIFT,

We are including blank folders that are pre-organized with all the categories you need to be sure to document to maintain your tax home! In addition, it will include a comprehensive document from one of our trusted recruiting companies in case you want more quality info on the topic.

COMMON QUESTIONS

IS THERE A 12 MONTH RULE?

Yes, you may not work any assignment for more than 12 months within a 24 month period. You will no longer be considered a traveler.

CAN I USE THE 50 MILE RULE

No, this is a myth. Some believe they can receive tax free income as long as their contract is 50 miles from home. In reality, there is no such thing as the 50 mile rule or any set distance to earn tax free housing stipends. You must be far enough away from your tax home that it is unreasonable to return and thus you need alternative lodging. This also means you have to have lodging expenses that will be reimbursed by the travel company. So you can’t simply stay at your family members home for free and earn those stipends.

A REMINDER…

It is your responsibility to maintain your tax home. The travel company doesn’t protect you from this and it isn’t their responsibility. Contact a tax professional at Traveltax.com and use IRS.gov for more examples of what qualifies and what doesn’t. We are not tax professionals and each traveler's situation is different, so make sure to check if your situation qualifies. We don’t have all the answers to the “what ifs”. We’re just physical therapists sharing our experience.

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RESOURCES

IRS ; “FOREIGN EARNED INCOME EXCLUSION - TAX HOME IN FOREIGN COUNTRY” ; HTTPS://WWW.IRS.GOV/INDIVIDUALS/INTERNATIONAL-TAXPAYERS/FOREIGN-EARNED-INCOME-EXCLUSION-TAX-HOME-IN-FOREIGN-COUNTRY#:~:TEXT=YOUR%20TAX%20HOME%20IS%20THE,YOU%20MAINTAIN%20YOUR%20FAMILY%20HOME.&TEXT=IF%20YOU%20HAVE%20NEITHER%20A,HOME%20IS%20WHEREVER%20YOU%20WORK.
IRS PUBLICATION 463 ; HTTPS://WWW.IRS.GOV/PUB/IRS-PDF/P463.PDF

Tax Home Requirements Simplified for Travel Therapists