The Internet, satellite communications, and WiFi. Cozy laptops, iPads, and other portable devices. These things make it so easy to work or run your business from anywhere. One of TaxMama’s favorite sayings is that her students can attend her classes from anywhere on or off the planet—even the International Space Station—as long as there is an Internet connection. But what about paying taxes?
Lots of people have hit the road. Some spend the year driving around with their families, homeschooling their children and giving them a real taste of the world. Others have given up the high cost of stationary living and gone mobile.
For example, Jerry sold his home and now travels around in his 18-foot RV. It’s small enough for him to park anywhere without his having to pay rent in an RV park. When the mood strikes, Jerry chooses to use a luxury RV park, a motel, or even a five-star hotel.
Jerry communicates with friends, family, and clients by email, Skype, and cell phone. He can view and pay all his bills online. When snail mail arrives, his mailbox service forwards it to him or scans it for him. When he needs to meet with several people at once, Jerry uses a free or paid online conference service. He can record the entire session for later review or to sell as a course.
Being on the road all the time, Jerry must have a whopping travel expense, right? Not right. In fact, Jerry’s travel expense deduction is zero.
Jerry and people like him have no tax home. This is a common problem for long-haul truckers, seamen, and others in the transportation industry because to deduct the cost of meals and lodging when you travel, you must travel from someplace—a tax home.
The main things the IRS considers when determining your tax home
- Are you paying rent or mortgage in your tax home? While you may not be making monthly payments, you must have continuous, ongoing costs.
- Do you ever earn income in that area? Not in the last couple of years? How is this your tax home?
- Are your travels taking you away temporarily? Or for more than a year? Lots of short-term contracts may help, but only if you show that you’re making an effort to find work in your home base. If there is no possibility of work in your field, your tax home may have moved to where you now work.
Which travelers can win the tax home game?
Folks who are smart enough to minimize their home base expenses, to earn income at home, and to hit the road a substantial part of the year can win at this game.
Use your tax home address or location for your online business. Your income will be generated at that address. That means that when you are traveling for business, you have a base.
Since you won’t be there often, select a tax home in a state without income taxes. Rent a room from a friend you can trust to receive your mail and forward it to you. Spend time there every month or so, working and earning money.
Want to have some fun while learning more about this topic? Visit the Tax Court website’s search page. Enter “tax home” into the search field and then read the cases at random. They are much more entertaining than you’d expect.
Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.