Tax Home: US Expat Taxation
Tax home is the basic area where you are involved for work, duty or business. Your actual personal home need not be in your tax home. Tax home is a place where you are indefinitely involved in work. In case of work that involves a lot of travel, the place where you live mostly is considered your tax home. The significance of Tax home is that, it is mandatory to have a tax home in the foreign country for you to claim foreign earned income exclusion, foreign housing expense exclusion or foreign housing deduction.
It is required that you do not have an abode in the US for you to prove a tax home elsewhere. Now what is an “abode”? The US government differentiates between a tax home and an abode by defining the abode as more of a personal and family dwelling. If you have a personal permanent dwelling in the US that you maintain and visit frequently then you are not eligible for a tax home in a foreign country.
The criteria for defining whether a home is an abode in US or not are:
- You maintain a US driver license
- The amount of time spent in the home
- You maintain a US bank account
- You maintain a voter’s id in US.
Having a temporary home or a rarely visited house in the US is allowed. However, if the court can rule it as an abode, owing to the points mentioned above then you cannot have a tax home as an expat. The idea behind the rule is that if you have a permanent and functional home in US then you cannot claim exclusion for another place of residence which is temporary by implication in a foreign country.
If you have been sent on an assignment to a foreign country for an indefinite period then under certain circumstances you can make it your tax home. If your period of assignment is pre-defined and is less than a year then it cannot be your tax home. You can then state the living expenses as deductions for income tax.