What is a tax home?
If you decide you are doing travel therapy, you’ll need a tax home.
A tax home is a place that you could think of as your home base: the place where you get your mail or just the corner room of your parent’s basement. The biggest part of this - you’ve got to be paying for it.
This is because the benefits you receive (tax free stipends) while doing travel contracts are there because you are fulfilling a need away from your home.
The stipends you get while on contract are made up of housing/meals/incidentals and are based on the location of the contract. These stipends are there for you BECAUSE you are paying for two households - one where your home base is and one at your contract location.
The IRS has the ability to make you repay your stipends if you do not maintain a tax home or if you do not pay rent at your contract location.
So, you can’t just live in a van for free at the beach.
Maintaining a tax home consists of records of payments to what you consider your home base.. And the rent you pay to your tax home needs to be a fair rate for that location and claimed on your landlords taxes.
You cannot simply pay your mom $50 and call it good. It needs to be a fair rental rate for what you say you are renting in the home.
As an example, I rent a room from my uncle in Indiana. I pay him a fair rental rate for a one bedroom in his area and I transfer him rent monthly (well, actually I forget for months in a row and then end up sending him a chunk of money - but it gets paid!). And he claims it on his taxes each year.
Some exceptions to this that I have seen are that you could pay a share of monthly bills, like the electric and water bill, instead of rent because this is contributing to maintaining the household. But that’s still like rent, you’re just breaking it down in a different way.
However, it would still need to amount to enough to show that you are actually paying to live there and not for dirt cheap, just because it’s your parents house.
Again, you need to justify WHY you need the stipends for taking a job further away from home. It’s because we have two households to pay for that we get the stipends in the first place.
What type of tax home set up do you have? Share below so people can see what else is out there!