Friday, February 1, 2013

Full Time RVing & Your Tax Home

Possibly one of the more confusing aspects of being a full-timer is declaring a tax home, especially if you or your companion are self employed. When you no longer have a stationery dwelling, and your business travels with you, it's quite likely that you may have more than 1 tax home in any given year. When you are self-employed, your tax home travels with you. In many instances, you will be required to file several state returns, whether you visited the state or not. This is because all income is reported to the IRS by the sourcing state. Receiving your income from Google Ads? Google is located in CA, so without even visiting the state, you may be required to file a CA return if your income reaches or exceeds the threshold for your filing status.

Many of my clients receive rental income from properties around the US. Many of these require filing in the state(s) the properties are located, if the gross income reaches the filing level for that state. This also holds true with other forms of passive income. Do you receive 1065K-1 forms, or 1120S K-1 forms? How about oil and gas royalties. But it becomes a little more complex when you are a full time RVer.

Example: Let's say you winter in Florida, and consider Florida you tax home, and you are self employed. Florida has no state income tax, so you would only be required to file a federal return.

Now it's spring, and you move up to Tennessee. This state only taxes your portfolio income, interest and dividends. The threshold for a married couple filing jointly is $2,500 of portfolio income. So as long as you don't earn that amount of portfolio income during your stay, there is no filing requirement.

It's summer, and you head up to Michigan. In this state, non-residents that receive Michigan sourced income of any amount, are required to file a return.

Fall has arrived and you head south to North Carolina. Non residents of NC are required to file if your income earned here equals or exceeds the threshold for the applicable filing status.

The vast majority of states tax you on income sourced from the state. In some states, regardless of the amount of income, if you are required to file a federal return, they want a state return as well.

Remember, I am talking of filing requirements, not paying taxes. If you are required to file in several states on the same income, what you pay in one state is usually taken as a credit on another state. For this example, let's go back to Google income. Say you meet the threshold for filing a return in CA. You are also required to file also file in New Mexico or Utah, or any state assessing a state income tax. If you stayed they long enough, regardless of your Florida residency, you may be required to file non-resident returns. So, depending on the state and the laws of that state, you would pay the first state, say California, report the same amounts in NM and UT, and then take a credit for the taxes you paid to the state of CA. Remember, there is no double taxation, but there are certainly double, triple etc. filing requirements!

Point to remember: On the left near the bottom of this page, I have links to each and every state. If you spend any time in any of these states, please check and find out their filing requirements. The technology exists for each state as well as the IRS, to track your sources of income. And, I am only talking about income taxes. There may be special requirements for self employed persons such as sales taxes, business filing taxes, etc. So have fun out there, but please make certain you've met your filing obligations. It's no fun to receive a love letter from a state taxing authority 2 years after-the-fact and have to pay fines, penalties, and interest on top of any tax you may actually owe!

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