Legal Definitions - tax home

A taxpayer'stax home refers to their primary place of business, employment, or post of duty. It is the entire city or general area where an individual's main work activity takes place, regardless of where their personal residence is located. This concept is crucial for determining whether certain work-related travel expenses can be deducted for tax purposes. Generally, travel expenses are only deductible if the taxpayer is traveling away from their tax home for business reasons.

• Example 1: Employee with a Fixed Office

  Sarah lives in a suburb of Dallas but works full-time at a marketing agency located in downtown Dallas. Her office in downtown Dallas is her principal place of business.

  Explanation: Sarah's tax home is Dallas. If she travels to Austin for a business conference related to her job, she is traveling away from her tax home, and her travel expenses (e.g., hotel, flights, business meals) for that trip would likely be tax-deductible. However, her daily commute from her suburban home to her downtown Dallas office is not considered travel away from her tax home and is therefore not deductible.

• Example 2: Remote Worker with a Home Office

  Michael is a software developer who works exclusively from his home office in Portland, Oregon, for a company based in California. He conducts all his business virtually and rarely travels for work.

  Explanation: Michael's tax home is Portland, specifically his home office, as it is his principal place of business. If his company requires him to attend an annual meeting at their California headquarters, he would be traveling away from his tax home, and his travel expenses for that trip would be deductible. If he decides to work from a coffee shop across town, that is not considered traveling away from his tax home.

• Example 3: Professional with an Indefinite Assignment

  Elena is an engineer whose company is based in Chicago. She is assigned to oversee a new construction project in Denver, Colorado, that is expected to last for 18 months. During this period, she rents an apartment in Denver and works full-time at the project site. She still maintains her permanent residence in Chicago, where her family lives, and she flies back to visit them once a month.

  Explanation: Because Elena's assignment in Denver is expected to last longer than one year, Denver becomes her tax home for the duration of the project, as it is her principal place of business. Consequently, her living expenses in Denver are generally not deductible, and her travel expenses for flying back to Chicago to visit her family are considered personal travel and are also not deductible, as she is traveling away from her tax home (Denver) for non-business reasons. If the assignment were temporary (e.g., 6 months), Chicago would likely remain her tax home, and her expenses in Denver could be deductible.