The determination
of a tax home is made on an individual basis. A husband and wife could each have
a separate tax home, if they each have a principal place of business at different
locations.
Generally, a taxpayer's
tax home is the location of his/her permanent residence. The IRS has often interpreted
one's tax home to be the location of the taxpayer's principal place of business.
The Second, Fifth, Sixth and Ninth Circuit courts, however, have all rejected
or limited the IRS's interpretation of the term "home." These courts maintain
that a taxpayer's tax home is the location of his permanent abode or residence.
The
Supreme Court has refused to settle the issue. However, the dissenting opinions
have agreed with the above Circuits by interpreting "home" as the taxpayer's permanent
abode or residence. However, the Supreme Court did hold, that the taxpayer's costs
for travel, etc., to work elsewhere from his tax home were nondeductible, because
they were a result of the taxpayer's personal choice to live away from the principal
post of duty, rather than as a result of business exigencies. (I know some of
your eyes were lighting up with the possibilities until you read that line.)
Moving
to Florida — or Any State without Income Tax?
Many
of our clients reside in Georgia during their working years. This is their residence
and tax home. At some point, they may purchase a second home in Florida. Florida,
as many of you know, does not have an income tax. If you are thinking of moving
to Florida in your retirement years, do not automatically assume that it is less
expensive from a tax standpoint to move there. Florida has
higher sales tax in some cases and higher gasoline taxes, etc. Georgia has a retirement
income exclusion per taxpayer of $30,000 for 2007 and $35,000 for 2008. Up to $4,000 of earned income,
as well as interest, dividends, capital gains and pension income can be excluded
from Georgia taxable income at age 62. In addition, state income tax is not paid
on social security income. Do not automatically assume that you will pay less
tax if you move from Georgia to Florida.
Change
of Residency
If you decide
that you are spending more time in Florida than in Georgia, and you wish to make
the move establishing your Florida home as your permanent residence and your Georgia
home as a vacation home, you should "dot your I's and cross your T's:"
