Your tax home is the location you're traveling from when you intend to claim business travel expenses on your tax return. The costs of traveling back and forth from your tax home to do business are deductible expenses, although commuting expenses for driving from your home to your business location aren't deductible unless you maintain a home office.
The concept of "tax home" has little meaning if your business location is the place where you work all the time, but it becomes important if you travel as part of your business or work in different locations.
What Is a Tax Home?
The IRS defines your tax home as your "regular place of business." It can include the entire city or a general area in which your business or work is located. Some examples include:
- Atlantic City is your tax home if your home is in Atlantic City and you work in that general area, coming home every night. You are commuting back and forth from home to work, so your driving expenses aren't deductible.
- Philadelphia is your tax home if your home is in Atlantic City but you perform work in Philadelphia, coming home on weekends and staying in a hotel in Philadelphia during the week. You can't deduct your expenses in Philadelphia because that's your tax home, and you can't deduct travel back and forth to Atlantic City because that's commuting.
How a Tax Home Works
You must determine where your tax home is located or, in some cases, if you even have a tax home before you can deduct travel expenses. You must then determine that your business travel involves being away from your tax home. You can only deduct away-from-home travel expenses if these two conditions are met.
Types of Tax Homes
Your tax home is your main place of business if you have more than one regular place of business. Consider the total time you ordinarily spend in each place and the level of your business activity in each place to determine your main place of business.
You might not have a regular or main place of business because of the nature of your work. Maybe you service your clients' computer systems at their sites. Your tax home might be the place where you regularly live in this case.
You're considered an itinerant or transient if you don't have a regular or main place of business and you have no place where you regularly live. In this case, your tax home is wherever you work.
You can't claim travel expense deductions as an itinerant because you don't have a home to travel away from.
Your tax home is your family home if you work from home. There are special rules for deducting expenses for traveling to and from your home business, and you might additionally qualify for a home office deduction.
Requirements for Claiming a Deduction
The IRS indicates that you're considered to be "traveling away from home" if:
- Your duties require that you be away from the general area of your tax home for "substantially longer than an ordinary day's work."
- You need to sleep or rest to meet the demands of your work while you're away from home.
This doesn't mean taking a nap in your car, and you don't have to be away from your tax home for a whole day provided that as your relief from duty is long enough to get some rest. An example would be a truck driver who leaves home in the morning, travels to another location with a layover, and who eats and sleeps during that layover.
The IRS also distinguishes between "temporary assignments" and "indefinite assignments." A temporary assignment is typically for one year or less. Your tax home doesn't change during a temporary assignment, but it does change for an indefinite assignment.
You aren't considered to be away from home while you're in your home town if you go home on your days off from a temporary assignment, so you can't deduct meals and entertainment expenses while at home. But you can deduct the cost of your hotel room back to the location of your assignments.
You might be able to claim the foreign earned income exclusion if you can prove that your tax home is outside the U.S. Qualifying for this exclusion depends on whether your assignment is temporary or indefinite.
You can deduct business travel expenses to reduce your business taxes when you've determined that your business travel from your tax home qualifies.
- Your tax home is the place where you regularly perform business.
- Your ability to claim a tax deduction for the costs of traveling to do business depend on numerous rules regarding your tax home.
- Special rules apply if you’re running your business from home.
- Costs that are considered to be for commuting aren’t tax deductible.
Note: This article gives some general information on the tax home concept, but it should not be used as tax or legal advice. Each situation is unique and the tax home concept is determined on a case-by-case basis. Talk to your tax advisor if you aren't sure which work location is your tax home.