What is a Tax Home?
If you travel for work, you may be able to claim tax deductions for some of the expenses you incur while you're away from home on business. But your "home," in this sense, isn't necessarily where you live. It's where you work—what the IRS refers to as your "tax home."
Deductions and your tax home
When you travel away from your tax home for work you might be eligible to deduct travel expenses on your taxes. For tax years prior to 2018, unreimbursed employee expenses, including travel away from your tax home, can be an itemized deduction. However, beginning in 2018 these types of expenses are deductible for businesses but no longer as an unreimbursed employee expense for employees.
General definition of a tax home
The IRS defines your tax home as the "entire city or general area" of your workplace. If you work in Pittsburgh, for example, then your tax home is the entire Pittsburgh metro area. The tax home designation typically doesn't have anything to do with where you actually live—the place where you lay your head at night. You could live 100 miles from your workplace and commute, but the workplace would still be your tax home.
Why your workplace is home
The tax home designation largely exists for the purpose of deducting work-related travel expenses, which is why your workplace, rather than your house or apartment, is "home." Imagine if you really did live 100 miles outside Pittsburgh but worked in the city.
If you were allowed to count your house out in the country as your tax home, then, theoretically, you could consider any money you spent in Pittsburgh to be a work-related travel expense. The IRS is wise to these kinds of tricks, which is why "tax home" is what it is.
When you have no regular workplace
Some people have workplaces that are divided among several places. In such cases, the IRS expects you to choose one as your work home based on several criteria:
- How much time you spend in each place.
- How much work you actually do in each place.
- How much money you make in each place.
Of these, the IRS says time spent in each place is the most important.
If you work at home or travel to assignments directly from home, without a fixed workplace, your tax home may well be your actual home. If you don't have a fixed workplace and you have no fixed home address, the IRS might consider you itinerant, in which case you wouldn’t be able write off any travel expenses because you're never "away from home."
Employees vs. the self-employed
The tax home rules are generally the same for employees and self-employed people, although the degree to which they can deduct business-related travel expenses differs. In general, employees can deduct only work-related expenses for which they haven't been reimbursed by their employer, and they can't deduct the full amount. Instead, for tax years prior to 2018, these expenses can be taken as an itemized deduction, subject to (reduced by) 2% of adjusted gross income, on your tax return. Usually, self-employed people can deduct ordinary and necessary business-related expenses from business income. Travel expenses must be incurred away from their tax home to qualify for deductions. Beginning in 2018, most all employees are no longer eligible to deduct these or other unreimbursed employee expenses.
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