Whoa!  This could have just ruined one of my plans for the future…

I have been considering buying an RV.  Making that my office, where I can travel the USA and help my clients where they are.  I’d keep my home where it is (ok, maybe downgrade a little), but the RV would let me really cater to my clients.  Assuming the pandemic does end….

Except…

A tax court ruling just shattered the wonderfulness of that concept.  In essence- where is thy tax home….

Decided on 26 January 2021, my plans might have have lost some of their financial edge.  The question they dashed is “Where is your tax home?”  And, I’m glad they didn’t make this an issue back in the early 1980’s.

The IRS holds that one’s tax home is the “general area” of your main workplace.  (They do NOT consider one’s bathroom a workplace, sorry.)

Consider my RV rides- where I am performing work at various locations, with no regularly established place of business.  (Actually, I did plan to set my regular place to be my normal home.  Kind of like I did in the 1980s, when my normal business home was the corporate headquarters in Charlottesville, VA- and then I commuted four times a week to Long Beach, CA to oversee the operations there [West Coast regional and International hub].  And, deducted all travel costs, meals, etc when I wasn’t in Charlottesville.)

The IRS, as defined in this case (Soboyede, TC Summary Opinion 2021-3, 26 January 2021  Docket No. 13146-18S), determines the tax home by the time spent at each place, the work performed at each place, and the income generated at each place.  (That often makes your abode your tax home if you are self-employed.) You do remember that personal expenses- like commuting or personal lodging at your tax home- are non-deductible.  After all, the tax law doesn’t allow deductions for personal expenses, such as regular commuting or personal expenses of the tax home.

Well, A.A. Soboyede practiced law- in Minnesota and Greater Washington DC.  And, except for a 54 day repose in Nigeria, he split his time between Minnesota and DC.  (CY 2015.)  His income was $ 46,310 for document review.  $ 38,548 was accrued from the DC locale and $ 7,852 from Minnesota. The lawyer deducted $ 8400 for hotel and apartment expenses in Maryland as part of this travel expenses.

Now, comes the computations. The IRS decided he spent 161 days in metro DC, 54 (nonworking) day in Nigeria, and around 115 days in Minnesota.  Even if the other 35 days of the year could be accrued to Minnesota, he spent at least 50% of his time in metro DC.  (The income accrued was CLEARLY in favor of a DC residency.)  As such, his tax home is DC metro- and the hotels and apartment are not valid deductions.  That time did not denote “away from home” activities.

In my Charlottesville-LGB example, I might have fared better.  I generally spent 175 days in Charlottesville, 170 days in Long Beach, and the rest of the year in various other locations.  So my Long Beach expenses would pass muster.

My RV idea… That really depends on how much revenue I would be accruing in metro DC versus the rest of the US.  (I do get paid a salary by my firm; I am talking about the deductibility of my expenses by my employer; the firm of which I am a significant stockholder.)  Right now, the bulk of the funds earned come from away from metro DC.  However, there is no singular location that commands a significant portion, so my RV and travel expenses will still be deductible- as long as the revenue mix stays the same.

This is where “forewarned is forearmed” makes great sense.