Tax home requirements

[thenney]

I have lived and worked in Olympia, Washington the last two years. I just moved and started a job as a travel nurse in Seattle, Washington. It is a temporary job, not expected to last more than 1 year.

I get an hourly wage, and a tax free stipend for housing and food. To qualify for this tax free stipend, I believe I have to have a tax home and pay rent in two different places: one at the place I am working (Seattle, WA) and one at a tax/permanent home (in my case, I was going to use my brother’s address in texas.) 

I have a nurse license in Texas, under my brother's address, but my driver's license is for Washington. Should I have this changed? Should I register to vote in Texas? 

To keep my tax-free stipends, should I write out a rental agreement, have my brother sign it, and pay him rent via Venmo/check? Or can I just put my name on his utilities? 

If I am paying him rent, he would need to claim it as income, right?

Thanks to anyone in advance!! 

[Anonymous_]

@Critter-3 

[Opus 17]

If you are a W-2 employee:

Your company may pay you a tax-free allowance for food and lodging if you are traveling away from your tax home on temporary assignment.  If they pay a stipend, they must use an accountable plan.  That means that they either collect your receipts and verify your expenses, or they can use the approved federal meals and lodging rates (but they must still verify your dates of employment.)  If they don't use an accountable plan, they must include the stipend in your W-2 taxable wages, and you can't deduct anything because that deduction was eliminated for W-2 employees by the TCJA. 

If you are a 1099-NEC independent contractor and you file a Schedule C, then:

You can deduct half the cost of food and the entire cost of your lodging as a business expense if you are traveling away from your tax home.  Likewise, the company can reimburse your expenses and not include it on your 1099-NEC, but only if they have an accountable plan.  If they pay you a stipend without an accountable plan, you must include the entire stipend as part of your schedule C taxable income, and then you can deduct food and lodging as a schedule C expense against that income, following the normal rules for deducting business travel expenses.

The problem is establishing your tax home.

Since you have worked the last two years in Olympia, Olympia is your tax home.  Your travel, lodging and meals to work in Seattle are deductible business expenses if and only if the work in Seattle is temporary, meaning that it is expected to last and actually does last less than one year.  If the job is open-ended (indefinite), or is expected to last more than a year, then Seattle is your new tax home and none of your travel, food and lodging expenses are deductible or tax-free.

You can't create a tax home by paying rent on two places.  Your tax home is where you earn most of your income.  Even if your tax home started out in Texas, your tax home became Olympia when you worked there more than one year.  If your company has a different method for verifying your tax home, that does not match federal law, you may be able to qualify for a payment, but you would be vulnerable in an audit (as would the company, probably).  

See IRS Publication 463.

https://www.irs.gov/forms-pubs/about-publication-463

[TomD8]

This isn't tax-related, but you should be aware that you must have a Washington State nurse's license in order to practice nursing in Washington.

https://nursing.wa.gov/licensing/apply-license

Yes, rent you pay to your brother is taxable income to him.

And as @Opus 17 explained, you can't arbitrarily choose the location of your "tax home."  Your tax home is determined by IRS rules and definitions.

[thenney]

Right, of course. I have had a Washington nurse liscense since 2020. In addition to my texas nurse liscense. (they wouldn't have hired me to work in Washington if I didn't have one, haha.)