How to figure out your tax home

What is my tax home? And why should I care?

As you try to make the most out of the potentially tax-free money you receive as a travel healthcare professional, two terms probably keep popping up. Permanent residence and tax home.

What do these terms mean and how do they affect tax-free reimbursement? Let’s start by defining them:

Permanent residence: A place of residence that you have legal ties to that connect you to a community, such as a driver’s license, voter registration, etc.

Tax home: The area that’s your regular place of business or main source of income

That sounds fairly straightforward. But when you’re traveling, your tax home can get more complicated. Because most of the work a traveling healthcare professional does is temporary, you may not have a primary place of business or income. The tax code recognizes that individuals shouldn’t be expected to move their permanent residence or tax home to a different location with each assignment.

Check out these real-world scenarios to help you determine the right answer to the question “Where is your tax home?” for your situation.

Tax scenarios

Scenario Legal Declaration
  • 1 13-week temporary assignment in Denver
  • Rest of year working from your permanent residence in Chicago
Tax home: Chicago
  • 1 temporary assignment in San Diego where you make 51% of your income for the year
  • Rest of year working from your permanent residence, making less than 50% of your income
  • San Diego assignment repeats regularly for three years
Tax home: San Diego
  • 3 13-week assignments in different cities
  • 4th assignment – in Tampa (repeats same city each year for 3 years)
Tax home: Tampa
  • Multiple temporary assignments
  • Never repeat the same city
  • Maintain a residence in Orlando
Tax home: Orlando
  • Made $40,000 in Des Moines working a regular job
  • Worked 6 days/month in Los Angeles and made $80,000/year
Tax home: Los Angeles as the majority of income made there

What a tax home means for tax-free reimbursements

Determining a tax home has ramifications for your per diem payments, such as meals and incidentals and housing allowances. However, you must have substantial recurring, duplicative expenses to qualify for tax-free reimbursements. When you claim a place of duplicate residence as your tax home, you must have a contract showing you have substantial financial obligations to maintain it.

Other reimbursement watch-outs include:

  • Rent for your permanent residence must be fair market value and the rent recipient must claim the income on taxes for it to also be your tax home.
  • If you have a tax home but rent it all of the rooms of it out, you are not eligible for tax-free reimbursements. You must maintain a portion of the property for yourself.
  • You may not use a storage unit or a P.O. Box as a residence.
  • If you live in an RV while on assignment and do not have a permanent address with a financial obligation, you are not eligible for tax-free reimbursements.
  • Staying in one location for 12 months or longer likely disqualifies you from tax-free reimbursements.

While TaleMed recruiters and staff members will help travel healthcare professionals throughout their assignments, Human Resources Manager Jessica Meek has this simple, but important, advice.

“We’re here to help in any way possible,” says Jessica. “But we recommend that our travelers meet with a certified public accountant to discuss their specific tax circumstances. A CPA can help you stay compliant and make sure you are getting all the tax advantages available.”

For more information

For more information on how to become the next member of the TaleMed family as a traveling healthcare professional, contact us today. You can also follow us on FacebookTwitterLinkedIn and Instagram.