What is a Tax Home?

What is a Tax Home?
Photo by Tierra Mallorca / Unsplash

If you’ve done any research regarding deductions for business travel, you’ve probably come across the enigmatic term in the title of this post.

Tax home

And if you’re anything like me, you also probably wondered what in the world that means exactly. By definition, a tax home is the geographical area where you earn the majority of your income. It is not the permanent residence where you maintain legal ties—such as where your driver's license, personal effects or family members are located.

Say your family home is in New Jersey, but you travel daily to NY to your office in the financial district. Because the office in NY is where you earn your income, your office would be your tax home according to the tax code. Of course, if you work from home then your actual residence also becomes your tax home. Business travel deductions become applicable once you leave your tax home for an extended period of time. Even though technically you are traveling for work in the first example from New Jersey to New York those travel expenses are not deductible because you are traveling to your tax home. On the other hand, if you had to leave your office in the financial district to go to another branch office in upstate New York, your travel expenses would be deductible. If you a transient worker this can get a bit complicated, but just remember when it comes to the tax code, home is where the money is.