Healthcare travelers face some unique tax concerns. Working in multiple states, identifying and maintaining a tax home and deducting expenses are some unique issues to travelers. Joseph Smith specializes in helping mobile professionals with tax preparation at Travel Tax. He is a former traveling respiratory therapist and a current IRS enrolled agent. In this piece, Joseph answers some frequently asked tax questions from healthcare travelers.
1. What is a tax home and how to I determine if I have one?
In three sentences a tax home is:
1) Ones main area of work/income on a regular, annual basis.
2) If you do not have a main area of work/income, the tax home can be where you maintain a dwelling that you incur significant expenses for that are duplicated when away from home on assignment.
3) If you do not have #1 or #2, you are itinerant and all per diems, stipends, allowances, travel reimbursements are taxable.
2. How do I maintain a tax home?
How many days per year should I physically spend there?
30 a year or 60 every two years
What if I cannot find work in my tax home neighborhood and do not earn any income there?
Then you would qualify under the duplicated expense method of a tax home
How do I determine if I am duplicating expenses? Do I have to pay fair market value rent or can I pay the utilities on the property?
You are maintaining a dwelling, not a utility. Utilities are part of maintaining a dwelling. If with a related party, rent needs to be fair market value OR you can split expenses like roommates.
If I rent from my family do they have to pay tax on the rent? What are the implications if they don’t?
Preferable if they claim it on their return since you have so much tax free riding on the arrangement – if they don’t, an auditor can always follow your rent money trail
What if I own my home and the mortgage is paid off?
Homeownership costs are inherent and you still have maintenance expense. Best way to travel.
3. Can I still travel if I don’t have a tax home?
Yes, but stipends are taxable
4. What are deductions that travelers can take on their taxes (2017)?
- Can travelers write off their commute between their temporary home and work? YES
- Can we deduct state license fees and CEU’s? YES
5. What are commonly missed deductions?
Meals in excess of meal allowances, mileage to and from the temporary worksite
6. Do I have to pay taxes to my tax home state even if I did not work there? What if my state has a local tax – do I have to pay it?
Yes and if you are lucky to live in a city/state that has a local tax the will tax ALL income earned anywhere less credits for taxes paid to other states. Your permanent residence state (not tax home state) determines who taxes GLOBAL income
7. If my tax home is in a state with no tax and I work in states with a tax do I have to pay tax to the states that I work in?
Absolutely. You are physically present there
8. How are the deductions going to change in 2018?
ALL business and travel expenses are gone till 2026 unless you are an independent contractor
Joseph C. Smith, EA, MSTax, RRT is the founder and owner of Travel Tax. He is a Registered Respiratory Therapist and IRS Enrolled Agent.