A reader recently asked my advice on whether or not to sell her home to travel. She wanted to know which would be better, keeping her home for the tax implications, or renting an apartment and using it to maintain a “tax home”.
The answer to her question depended on many specifics. If looking at it from a strictly monetary point of view, (as in, which would be cheaper?), then we can take a look at the following example:
Let’s say that your mortgage was $900 a month, but to rent an apartment and use that as your “tax home”, it would only cost you $600 a month. Sure, you are paying $300 less monthly, but then what are you buying for that $600? Then again, maybe your mortgage is only $100 in difference between the two and you rationalize that for an extra $100 a month, you would rather have the house as an investment. But, then you must think about what services you will need while you are away. By the time you hire someone to cut the grass and maintain upkeep on the house, maybe you are back at a difference of $300 between keeping the house verses renting.
I personally am a fan of real estate. Even in this market, if you buy something practical, it should be an investment that returns your money and then some. I have a condo in Ohio and did use that as my “tax home” while I traveled. It worked well because I could leave for months at a time and not have to worry about anything outside (the condo association takes care of all that). I did have my father look in on the place from time to time, but he never had to do anything.
I went back last year and turned my condo into a rental because I wanted to take advantage of the home market in Phoenix. This eliminated my condo as a “tax home” because I was no longer duplicating my expenses (which is one criteria for the tax deduction). However, I purchased a home in Phoenix and the next time I take a travel assignment out the Phoenix area, I will use this new home as my “tax home”.
You can probably claim an apartment as a tax home if you are still paying to maintain it while you travel. I have to say “probably” because when it comes to tax deductions, everyone’s specific situation will be different (now is probably a good time to add that old disclaimer: see your tax advisor for more information).
But, I won’t leave all of you hanging without a great resource. Joseph Smith is a tax advisor who also contributed to the chapter on taxes in my book on travel nursing. He was once a traveler himself and works preparing tax returns for other travelers. He is on the web at http://www.traveltax.com. His website also has a lot of good information on taxes for the traveling professional.
Whether you choose to rent or own, having an established “tax home” can help you add extra income to your pocket by taking part in your travel nurse company’s tax advantage program (many companies offer this, but not all). If you are deciding between the two aforementioned options, work the numbers yourself and see which might be best for you. If you need help with the calculations, try contacting Joseph at Travel Tax for some professional assistance.