Locum Tenens
Tax Home Guide

Your tax home is not the same as your legal residence, your domicile, or where you feel "at home." Under IRS rules (primarily Revenue Ruling 73-529 and subsequent case law), your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.

For most W-2 physicians, this distinction doesn't matter—their tax home and personal home are in the same city. But for locum tenens physicians who travel to different facilities across the country, the tax home concept becomes critically important because it determines whether your travel expenses are deductible business expenses or non-deductible personal expenses.

The IRS Three-Factor Test

When the IRS evaluates whether you have a tax home, they examine three factors. You don't need to satisfy all three, but the more factors in your favor, the stronger your position.

Factor 2 is typically the most important for locum physicians. If you maintain a permanent residence that you pay for year-round and you incur additional lodging expenses at your assignment locations, you're demonstrating that you have a genuine home base and are truly "traveling away from home" for work.

Regular Place of Business vs. Personal Residence

Here's where it gets nuanced. The IRS generally defines your tax home as your regular place of business—the location where you earn most of your income. But when you work locum tenens with assignments in multiple cities, you don't have a single "regular" workplace. In that case, the IRS falls back on your personal residence as your tax home, provided you meet certain conditions:

• You maintain a permanent home in the area (rent or own)
• You incur substantial continuing living expenses at that home (not just a nominal rent payment)
• You return to the home frequently between assignments
• You haven't abandoned the area as your main home

The One-Year Rule for Temporary Assignments

Even with a properly established tax home, you can only deduct travel expenses for temporary assignments. The IRS defines a temporary assignment as one that is realistically expected to last—and does last—for one year or less. If an assignment extends beyond one year, or if you reasonably expect it to last longer than a year when you accept it, your tax home may shift to that new location.

This is a critical point for locum physicians who take extended assignments. A 13-week contract that gets renewed three times is fine—as long as each renewal is uncertain at the start. But a 14-month contract, even with a "temporary" label, is indefinite from day one.

One of the most powerful tax planning strategies for locum tenens physicians is establishing a tax home in a state with no income tax. Since locum physicians often have the flexibility to live anywhere between assignments, choosing a tax-free state can save $15,000 to $40,000+ per year in state income taxes alone, depending on your income level.

Seven states currently have no individual income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. (Tennessee and New Hampshire historically taxed only investment income, but both have now fully eliminated their income taxes.)

Establishing Genuine Residency

Simply claiming a no-tax state as your tax home isn't enough. You need to establish genuine ties that can withstand IRS scrutiny. Here's a practical checklist for establishing residency in a no-income-tax state:

• Rent or purchase a residence — This should be a real home you use regularly, not a mailbox service or relative's spare bedroom
• Transfer your driver's license — Update within 30–90 days of establishing residency (varies by state)
• Register to vote — Strong evidence of intent to make the state your domicile
• Register your vehicles — All vehicles should be registered in your new state
• Update bank accounts — Open local accounts and update your address with existing banks
• Obtain professional licenses — If possible, get your medical license in the state
• File a declaration of domicile — Some states (like Florida) offer a formal Declaration of Domicile filing
• Spend meaningful time there — Ideally 30+ days per year between assignments

Your tax home is the foundation of every travel deduction you claim. Under IRC Section 162(a)(2), you can deduct ordinary and necessary expenses incurred while "traveling away from home" in pursuit of a trade or business. The operative phrase is "away from home"—and "home" means your tax home, not where you sleep.

What You Can Deduct With an Established Tax Home

When you travel from your tax home to a temporary locum assignment, the following expenses are deductible:

The Dollar Impact: A Real-World Example

Consider Dr. Patel, a locum emergency medicine physician earning $400,000 annually who works assignments in four different states throughout the year. Here's how having—or not having—a tax home affects her bottom line:

For more details on the full range of physician travel deductions, see our Physician Business Travel Deduction Guide.

The burden of proving your tax home falls entirely on you—the taxpayer. In an audit, the IRS will ask you to demonstrate that you maintained a genuine home base, that your assignments were temporary, and that your travel expenses were ordinary and necessary. Without proper documentation, you'll lose these deductions even if you legitimately qualified for them.

Essential Documents to Maintain

1. Proof of Permanent Residence

• Lease agreement or mortgage statements (showing continuous payments)
• Utility bills (electricity, water, gas, internet) showing regular usage
• Renter's or homeowner's insurance policy
• Property tax statements (if applicable)

2. Proof of Ties to Tax Home Area

• Driver's license and vehicle registration in the state
• Voter registration card
• Bank and investment account statements with tax home address
• Professional memberships and community involvement
• Medical, dental, and veterinary records in the area

3. Travel and Assignment Records

• Copies of all locum assignment contracts (showing temporary nature and duration)
• A detailed calendar showing where you were each day of the year
• Flight itineraries and boarding passes
• Hotel receipts and extended-stay invoices
• Rental car agreements
• Mileage logs for personal vehicle use

4. Return Trip Documentation

• Records showing you returned to your tax home between assignments
• Credit card statements showing purchases near your tax home
• EZ-Pass or toll records showing travel patterns

An itinerant worker is someone whose work requires travel but who has no fixed home base. Under IRS rules, if you're classified as itinerant, your tax home is wherever you happen to be working—which means you're never "traveling away from home," and none of your travel expenses are deductible.

This is the worst-case scenario for locum tenens physicians. The IRS has successfully reclassified traveling professionals as itinerant workers in numerous Tax Court cases, often resulting in five- and six-figure tax adjustments plus penalties and interest.

Red Flags That Trigger Itinerant Classification

• No permanent residence — You gave up your apartment and live exclusively in hotels, extended-stay facilities, or furnished rentals at assignment locations
• Family travels with you — Your spouse and children move with you to each assignment, suggesting you have no fixed home base
• Minimal home expenses — You pay a nominal rent ($100–200/month) to a family member to "maintain" a residence but never actually stay there
• No return trips — You go directly from one assignment to the next without returning to your claimed tax home
• No ties to claimed area — Your driver's license, bank accounts, and social connections are not in the area you claim as your tax home

How to Avoid Itinerant Classification

1. Maintain a real home — Pay market-rate rent or mortgage for a genuine residence
2. Return regularly — Go back to your tax home between assignments, even if briefly
3. Keep family at home base — If possible, have your spouse and/or children remain at the tax home (this is strong evidence of a genuine home base)
4. Incur duplicate expenses — Your lodging costs at assignment locations should be clearly separate from your home expenses
5. Limit assignment duration — Keep individual assignments under one year
6. Document everything — Maintain the comprehensive records described in Section 4

Your tax home isn't a permanent fixture—it can change or disappear entirely based on your actions and circumstances. Understanding the common triggers for losing a tax home can help you avoid costly mistakes.

Common Triggers for Losing Your Tax Home

1. Giving Up Your Residence

The most obvious trigger. If you terminate your lease, sell your home, or stop paying rent because you're "always traveling anyway," you've just eliminated the foundation of your tax home claim. This happens surprisingly often when physicians take back-to-back assignments and decide the rent is a waste of money.

2. Accepting an Indefinite Assignment

If you accept an assignment realistically expected to last more than one year, your tax home shifts to the new location. This includes situations where a "temporary" contract keeps getting extended and it becomes clear you'll be there for more than 12 months. Once the assignment becomes indefinite, all travel deductions for that location stop.

3. Moving Your Family to an Assignment Location

Relocating your spouse and children to your assignment location is strong evidence that your tax home has shifted. While it's not automatically disqualifying (you could argue the move is temporary), it significantly weakens your position.

4. Never Returning to Your Claimed Tax Home

If you go 6–12 months without visiting your claimed tax home, the IRS may argue you've abandoned it. Regular return trips (even short ones) demonstrate that the location remains your genuine home base.

Recovery Steps

If you've lost your tax home, here's how to re-establish one:

1. Secure a permanent residence immediately — Sign a lease or purchase a home in your chosen tax home location
2. Re-establish ties — Update driver's license, voter registration, and bank accounts
3. Return between assignments — Make a point of spending time at your new tax home
4. Start fresh on deductions — You can only deduct travel expenses incurred after your tax home is re-established
5. Consult a tax professional — The timing of when your tax home was lost and re-established affects your deductions for the entire year

When both spouses are physicians—especially if one or both work locum tenens—tax home planning becomes more complex but also presents unique opportunities. The key is coordinating your strategies to maximize combined deductions while maintaining a defensible position with the IRS.

Scenario 1: One Locum, One W-2

This is the most straightforward arrangement. The W-2 physician's workplace establishes a clear tax home for the household. The locum physician can deduct all travel expenses when working away from that home, because the household has an obvious, defensible home base.

Scenario 2: Both Physicians Work Locum Tenens

When both spouses work locums, you need a shared home base that neither spouse's assignments have turned into an "indefinite" location. The best approach:

• Establish a permanent residence in a no-income-tax state
• Both spouses keep assignments under one year at any single location
• Both spouses return to the shared home between assignments
• Coordinate schedules so that at least one spouse is "at home" regularly

Scenario 3: Spouses Work in Different Cities Full-Time

This is the trickiest scenario. If one physician works full-time in Chicago and the other works full-time in Houston, each spouse technically has a different tax home. The IRS may treat the higher-earning physician's location as the primary tax home for the household (under the "main place of business" rule), but the lower-earning spouse may still be able to deduct travel expenses from that primary tax home.

For additional strategies specific to physician couples, review our Complete Locum Tenens Tax Guide for comprehensive planning frameworks.