What is Tax Home?

How it works

"Tax home" is a US tax-law concept distinct from residence and domicile. It refers to the single geographic location where you regularly conduct your trade or business — your office, your assignment city, your principal client base. If you have no fixed place of business (because you genuinely move around or work remotely from no anchor), the IRS falls back to your regular place of abode — the city where you maintain a home you return to between trips.

The concept matters in two main contexts:

1. The Closer Connection Test. To qualify under Form 8840, a non-resident must show a tax home in a foreign country for the entire calendar year. A tax home that drifts (foreign for nine months, US for three) defeats the claim — closer-connection status is all-year-or-nothing.
2. Travel expense deductibility. A US person can deduct travel expenses incurred "away from home" on business. The reference point is the tax home — not the family home, not the rented condo, not the favourite Airbnb. Without a tax home (the IRS calls these taxpayers "transient" or "itinerant"), no travel is deductible because you are never "away from home".

How the IRS decides

When you have a fixed business location, that's the tax home — easy. When you don't, the IRS applies a three-factor test from §162 case law:

1. Whether you perform business in the area of the claimed home and stay there when not on assignment.
2. Whether you have living expenses at the home location that are duplicated when on assignment.
3. Whether you have not abandoned the area where you have lived; family lives there; you use it for lodging.

Two of three factors satisfied = tax home there. One or none satisfied = transient. The test is fact-intensive and audit-vulnerable.

Examples

• Indian developer at a Bay Area client for 8 months. Maintains his Bangalore apartment, family lives there, returns between sprints. Tax home = Bangalore. The 8 months in California are "away from home" — accommodation, meals (50%), local transit are deductible business expenses on Schedule C of his 1040-NR.
• Digital nomad with no fixed base. US citizen, hops between Bali, Lisbon, Mexico City — never more than three months in one place, no apartment held year-round anywhere, family disbanded. The IRS treats him as itinerant: tax home = wherever he currently is, which means he is never "away from home". No travel deductions; the entire concept of business travel collapses.

Common mistakes

• Confusing tax home with residence. Residence asks where you live for tax purposes. Tax home asks where you work. A French resident with a tax home in the US (regular consulting client) has both at once — different concepts.
• Claiming closer-connection with a part-year tax home. Form 8840 requires a full-year foreign tax home. Taking a 4-month US contract mid-year breaks the position regardless of how the rest of the year looks.
• Counting on "regular abode" without one. Ten months of nomadic travel + two months at a friend's place is not a regular abode in the IRS's reading. The fallback rule has teeth.
• Using tax home interchangeably with permanent home. "Permanent home" is a treaty tie-breaker concept (residency); "tax home" is a §162 / §7701 concept. They overlap in cases but resolve differently in marginal facts.