IRS Tax Home Rules
Understanding the IRS requirements for a tax home is crucial for travel therapists to qualify for tax-free stipends. A tax home is generally considered the entire city or general area where you work, regardless of where you maintain your family home.
1. Financial Responsibility: You must incur significant living expenses at your main home which are duplicated while traveling. This typically means paying for rent, mortgage, utilities, or upkeep at your permanent residence.
2. Business Connection: You should perform a portion of your business in the vicinity of your main home and use that home for lodging while performing business there.
3. Temporary Status: Your travel assignments must be truly temporary, defined as lasting less than one year in a single location. Exceeding this makes the new location your tax home by default.
Listed above are the IRS rules for maintaining your tax home.
What maintaining a tax home actually looks like:
When you get into travel therapy one of the main stipulations is that you must maintain a tax home and duplicate expenses while you are on your travel assignment. This is so that you can qualify for those tax free stipends which is the main financial upside for travel therapists.
This means you have a lease for your tax home and you are paying rent while on your travel assignment. There should be evidence of a regular stream of cash flowing between you and your tax home that is well documented. If you already have a mortgage that you are paying, then this can be your tax home. If you do not have this, which most new grads do not you have you can set up a tax home.
After consulting with a travel tax specialist, I learned that you can rent a room out of a house or apartment to do so. And if its your first time staying in a location you need to work 4 months in that location to establish it as your new tax home. Then, that new location can qualify as your tax home and when you go on travel assignments. You would then be duplicating your expenses and qualify for those tax free stipends.
You can even rent a room out of your parents home. Just know that you need to be paying "fair market value" for that room. I would look at zillow, airbnb, and furnished finder to see what prices are like in that area.
You also need visit your tax home regularly throughout the year to show you have some form of business in the area. My tax specialist recommended 30 days throughout the year. It is smart to keep a list of receipts for when you visit your tax home (gas and food) to prove you were there.
This is important to do this because if you were to get audited by the IRS and you do not have an established tax home, then you could owe the money back that you made from non-taxable stipends.
Again, I am not a travel tax specialist, this is just what I have learned talking to my travel tax person. If you have any questions regarding your own situation please get in contact with a travel tax specialist so that you can protect yourself