Thursday, October 30, 2014

RVs and establishing a Tax Home

Q.  My husband permanently works over 2 hours away from home and currently is driving to and from work every day which means he is on the road for over 4 hours a day and drives over 200 miles a day. He has a start time for his shift but not an end time; if something happens at his place of work he has to stay late making it even more difficult because he hardly gets any sleep.

 We cannot move near where he works for a number of reasons but he cannot take the commute any longer, he is exhausted. So we were wondering if we purchased and RV and parked it near his place of work so that could stay their during the week would the RV parking, RV purchase itself (we are buying it cash), or any of the RV expenses such as maintenance be tax deductible?

I have searched for the answer to this question everywhere and can't seem to find it, so I would really appreciate it if you could shed some light on the subject.
A.     Oftentimes there is just no justice in the world, and your case is one of them. For reasons of both physical & mental health, I see that purchasing an RV to park near your husband's work would be an excellent idea. However, in doing so, you would receive absolutely no tax benefits.  The reason is your husband's place of business is his tax home, which is different from your domicile.

The example I most like to use is that of elected senators & congressmen. They must maintain their residency in the state they represent, yet they need to travel to Washington DC, which becomes their tax home. None of their travel expenses are deductible as that would be their commute, and the cost of maintaining their second homes around the DC area also are non-deductible as this is considered their tax home.

Regrettably your husband is in the exact same predicament. Possibly the cost of a residency style hotel or studio apartment might be cheaper than the investment he would make in a RV. I suggest you check out all the possibilities including a boarding house. Getting sick shouldn't be an option. Good luck & thanks for writing!

Determining CA Residency

Q.  My wife and I are visiting California and a few more states.  We were going to stay in California for six months then move on.  One of the full time RV's in the resort that we are staying at in California told us that if we stayed one day over six months that we would have to pay California state income tax.  We are retired and still own a residence in Washington state where we do not have an income tax.
We were also told that the six months is based on a rolling year not a calendar year
We were in California for about six weeks earlier this year so it looks like if this information is correct we will have to leave California sooner! Can you please tell us if this is correct information?

A.  No doubt there is a lot of mis-information making the circuit of RV parks.  According to the Franchise Tax Board (FTB) your intent constitutes a large part of whether or not you will need to file a state tax return. Here is a link on how to determine residency.

I have never heard of a 6 month rule or a rolling 6 month rule. You may have made yourself a part-year resident, and Pub. 1031 explains the circumstances where that can happen as well as residency rules with several examples. 

CA taxes residents & part time residents on their world wide income, and during the period of time you are not a resident, only on CA sourced income. Being taxed on CA source income is a reality (if you meet the filing requirements) regardless of where your actual domicile is. And in these economic times, almost all states are following this practice.

On the left side of this blog, you will find links to all 50 states. It would be prudent to pay attention to any state you plan to visit for an extended time period to ascertain what, if any, income tax or property tax liability you may incur. Thanks for writing!