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. During your Expat Tax Preparation, your 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. For your Expatriate Tax
Return, you need to remember that 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.
Expat Tax Preparation can be a daunting task! An
experienced Expat CPA offering US Tax Service for Americans
Living Abroad and offering Expatriate Tax Services is essential to
limit your tax liability and protect yourself from a costly IRS
audit.