How to Establish a Tax Home If You Have No Established Workplace

You can't deduct travel expenses unless you first prove that you have a "tax home."

If you travel away from your tax home overnight for business, you can deduct your airfare or other transportation costs, hotel bills, 50% of your food, and other expenses. The key to obtaining this deduction is traveling away from your tax home for business purposes.

Your “tax home” is not the same as your personal home. Rather, your tax home is the entire city or general area where your principal place of business is located. For most people, this is the city where their office or other workplace is located. If you don’t live in a city, your tax home covers the general area where your business is located. This general area is anywhere within about 40 miles of your principal place of business.

However, some people have no main place of business—for example, a salesperson who is always on the road, traveling from sales contact to sales contact. In this event, your personal home (main residence) can qualify as your tax home, as long as you:

  • perform part of your business there and live at home while doing business in that area
  • have living expenses at your home that you must duplicate because your business requires you to travel away from home, and
  • satisfy one of the following three requirements: (1) you have not abandoned the area where your home is located—that is, you work in the area or have other contacts there, (2) you have family living at the home, or (3) you often live in the home yourself.

If you can satisfy none or only one of the three factors, you have no tax home. You are a transient for tax purposes. If you’re a transient, you may not deduct any travel expenses, because you are never considered to be traveling away from home. Obviously, this is not a good situation to find yourself in tax-wise.

This is what happened to Shalom Jacobs, a long-haul truck driver who spend most of the year on the road. When he wasn’t on the road, Jacobs considered his home to be in Cottage Grove, Minnesota, where he stayed in the guest room of a longtime friend and his family. Jacobs claimed he contributed around $10,000 per year to the Cottage Grove home, but he had no evidence to substantiate this claim. Both the IRS and Tax Court found that Jacobs was a transient for tax purposes because he failed to satisfy any of the criteria listed above. He appeared to spend little time in Minnesota. He lacked evidence showing he financially contributed to the Minnesota home--let alone that these expenses duplicated those that he incurred on the road. And he lacked a business reason for living there. In the words of the Tax Court, Jacobs was “a tax turtle--whose tax home followed him on the road.” Thus, he was not entitled to deduct any of the meal expenses (or any other traveling expenses) he incurred while driving his truck. (Jacobs v. Comm’r, T.C. Summ. Op. 2015-3.)

If you travel a lot for business, you should do everything you can to avoid being considered a transient. This means you must take steps to satisfy at least two of the three factors listed above.

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