We are just starting this adventure, and many so many things to learn!!
We talked to a CPA who specializes in travel nurses (which will be me) and he actually suggested NOT renting our home (so that it doesn't become an "investment property", plus depreciating as a rental). Any advice on this? It would seem that this would be the way to go so that I don't get dinged on the rather hefty housing and food/incidental moneys that the travel companies are offering. But we are so new, any advice would be so very welcome!!!
Help for the relatively clueless?
-- Edited by desertnurse on Thursday 5th of August 2010 12:57:46 AM
Mallo said
04:44 AM Aug 5, 2010
desertnurse wrote:
We are just starting this adventure, and many so many things to learn!!
We talked to a CPA who specializes in travel nurses (which will be me) and he actually suggested NOT renting our home (so that it doesn't become an "investment property", plus depreciating as a rental). Any advice on this? It would seem that this would be the way to go so that I don't get dinged on the rather hefty housing and food/incidental moneys that the travel companies are offering. But we are so new, any advice would be so very welcome!!!
Help for the relatively clueless?
-- Edited by desertnurse on Thursday 5th of August 2010 12:57:46 AM
Tax Home is a different thing then renting ones home just as an FYI.
Renting out a house now that can be a long involved topic.
I'm not sure why the CPA is against it unless he knows you or has had rentals in the past.
Tax wise it can make sense it can hurt you it all depends on what your plans are.
1. If you plan to rent for a year or two then sell when the market ticks up you will have converted your residence into an investment property losing the tax free gain on the sale of the property. So assuming that you can get 2,000 a month for the rental for an income of 24,000 a year vs having to pay taxes on any gain from the sale you'd have to run the numbers to see where the break even point comes in. Noting as he does that Depreciation increases the gain from any sale.
But you do get the advantage of writing off every single thing that you do with that house. This scenario is complex and one to be considered very carefully (See point three)
2. If you plan to rent for a year or two as you travel around and then come back home and live in the home for at least two more years after your travel period you could convert the home to a rental and then back to a home after redomicling in it reseting it as your personel residence. This negates a lot of the negitives in point one but does lock you into comeing back to that house again you'll want to verify the tax rules on this on the timing as I've been out of the tax business for a couple of years now.
3. This though is the biggie. Tenets are horrible people. I've had them throw things down the toilets to the point that we had to replace the run to the sewer. I've had them not tell me about water leaks in the house until thousands of dollars worth of damage were done. I've had them gouge holes in the walls. I don't own rental properties any more. I made a fair amount of money while I did but I didn't have the right mentality to do it. If you have someone you trust to rent too, or a house in a nice area that you can rent for enough money to make the risk worth it then maybe otherwise I'd just sell or get a house sitter that again was someone you trusted and even then I'd just sell. Houses sitting vacent are magnets for the worst dregs of human society.
Mallo
desertnurse said
11:31 AM Aug 5, 2010
EEEk. Very scary stories!
So New Mexico will be our tax home, as my assignments will not be longer than 12 months in any given state, we will maintain driver's licenses, vote, and file our taxes here.
We are not quite sure what our long range plans will be, as we have never fulltimed (or even lived anywhere else). We want to hang on to our home for now (as opposed to selling) due to the equity we have in it, and the market right now. But we would be renting for quite a bit less than the "tax free" subsidies the travel companies pay (meals and incidentals + housing stipend), and this particular tax person mentioned that if we did not rent we would be able to claim the RV as our travel lodging costs (? I think-I have another message into him now and waiting for a response).
I am hoping to right off much of the RV as either lodging or as my work, I'm just trying to see if that is possible or how to do it....
(thank you so much for your help!!!!) :)
Ckerr said
01:09 PM Aug 5, 2010
A couple of thoughts:
1. Check with a couple CPAs unless you have one you've used for a long time. Also you might want to look for a fee based financial planner who will charge you a consulting fee. The advantage is they can help you figure out what is your best option considering your overall financial goals.
2. In order to qualify for the exemption from capital gains tax on the sale of your principal residence, you must have lived there 24 of the 60 months prior to the sale of the property. The months need not be consecutive. At least that is the rule today. So you could rent your house while you are on the road and then move back in prior to the sale of the property.
3. It can make quite a difference how you are paid for the living expenses / per diem part of your wages. If it is paid as part of your salary straight up then much of your travel expenses are considered "business expenses" and reduce your income. If they are paid as per diem -- then they are considered differently and it gets much more complicated. But I don't think it has any relevance whether you rent your current residence or not... Again, check with a couple CPA types.
4. If you have a loan on your RV, the interest is deductible regardless of whether you sell or rent your current home...
5. If you do rent your current home I strongly recommend having a local property manager. It will cost you a little bit, but you really need someone who can handle things locally. It can help pervent a lot of the tenant problems previously mentioned.
-- Edited by Ckerr on Thursday 5th of August 2010 01:20:28 PM
Mallo said
06:08 PM Aug 5, 2010
desertnurse wrote:
EEEk. Very scary stories!
So New Mexico will be our tax home, as my assignments will not be longer than 12 months in any given state, we will maintain driver's licenses, vote, and file our taxes here.
We are not quite sure what our long range plans will be, as we have never fulltimed (or even lived anywhere else). We want to hang on to our home for now (as opposed to selling) due to the equity we have in it, and the market right now. But we would be renting for quite a bit less than the "tax free" subsidies the travel companies pay (meals and incidentals + housing stipend), and this particular tax person mentioned that if we did not rent we would be able to claim the RV as our travel lodging costs (? I think-I have another message into him now and waiting for a response).
I am hoping to right off much of the RV as either lodging or as my work, I'm just trying to see if that is possible or how to do it....
(thank you so much for your help!!!!) :)
OK I see where he's going now with these statements he's looking to write off the employee business expenses vs the income / expenses of renting as being a better deal.
There are a couple of things in this that should be broken out as seperate threads.
1. The house is meaningless as far as setting your tax home and if your away from home.
A. He's trying to avoid you changing tax homes to whatever state your working in by having you hold the house as a domicle but the IRS does not require that there are a number of tests the house is but one of them and if I remember the wording correctly it's "Owns property in". So there shouldn't be an issue in renting the one house and living in your second house at the job site (remember your RV counts as a second home.). You can use a mail forwarding service and count that as Tax home from a federal standpoint your OK it's the state stand points that get tricky see 2.
B. Even with all this there is still the aspect of how your paid. If your paid on a 1099 then every dime you spend near the new job counts as a deduction off a schedule C but you end up paying both halves of social security. If your paid on a W-2 basis then what is and isn't deductable depends on how far from your tax home the job is but even then there is a limit that if your away from your tax home more then a set amount of time (18 months) your move is considered a perm change in tax home.
2. Residency and the State of New Mexico. Why? Why not change your domicle state to Texas or SD or Florida or.... insert your prefered tax haven here.
A. If your not in New Mexico your looking at a complex multi state fileing weather your tax home is in New Mexico or not. Let's say each contract is for three months that means it's possible that you could work in 4 states in a given year and owe state taxes to all four states (it's pro-rated but the forms can be complex) but if you maintain that your a resident of New Mexico you will also have to pull all that income back to New Mexico where you will then be able to claim credits for the taxes paid in other states on the same income. It will get complicated fast I've done a lot of these for people.
B. Moving to a tax haven state at least clears out that pull back you just have to do your multiple non resident / part year resident returns.
This is why I am from Madison SD. My job is based in PA and every day I spend in PA counts as a day in that I owe them taxes for but as long as I don't stay in PA long enough to trigger residency there (or long enough in any other state to trigger residency) the PA dept of Revenue can't force me to declare my full income to the state of PA and I can pro-rate with SD.
Yours will be more complex in that you have to go to a site so avoiding state taxes is going to be hard but simplifying them is possible.
Mallo
desertnurse said
02:30 PM Aug 6, 2010
Thank you so much for such great (and detailed) advice! I think we have a plan now-thanks again!!!
Pinon said
01:58 PM Sep 9, 2010
Those housing allowances are a big deal. When I met my wife she was making $25 an hour, plus a $25 an hour taxfree housing allowance. So you make approx $100,000 a yr, but the government taxes you as if you were making $50,000. Desertnurse, are you traveling now? My wife and I are both nurses in ABQ. She has travel nursed before, I don't have the personality for that, but I can easily imagine getting a PRN job in CA and traveling to it again and again. Also, my boss has told me if I went PRN I could work 4 days in a row at the end and beginning of every other month (ie Sept 29,30, Oct 1,2, then Nov29,30, Dec 1,2) and keep my job. I don't know if I will bother, but it gives me some emotional security, and it has some meaning in terms of my pension. Tax wise NM does not impress me. When I moved here 7 years ago they taxed me for everything I made that year in CA (which I had already paid CA state taxes on.) State taxes aren't huge, but I have been told most states don't do that. If we don't own here, we will probably get residency in a different state, one we don't plan on (my wife) working in so those housing allowances can stay tax free! Good luck! Pinon
We talked to a CPA who specializes in travel nurses (which will be me) and he actually suggested NOT renting our home (so that it doesn't become an "investment property", plus depreciating as a rental). Any advice on this? It would seem that this would be the way to go so that I don't get dinged on the rather hefty housing and food/incidental moneys that the travel companies are offering. But we are so new, any advice would be so very welcome!!!
Help for the relatively clueless?
-- Edited by desertnurse on Thursday 5th of August 2010 12:57:46 AM
Tax Home is a different thing then renting ones home just as an FYI.
Renting out a house now that can be a long involved topic.
I'm not sure why the CPA is against it unless he knows you or has had rentals in the past.
Tax wise it can make sense it can hurt you it all depends on what your plans are.
1. If you plan to rent for a year or two then sell when the market ticks up you will have converted your residence into an investment property losing the tax free gain on the sale of the property. So assuming that you can get 2,000 a month for the rental for an income of 24,000 a year vs having to pay taxes on any gain from the sale you'd have to run the numbers to see where the break even point comes in. Noting as he does that Depreciation increases the gain from any sale.
But you do get the advantage of writing off every single thing that you do with that house. This scenario is complex and one to be considered very carefully (See point three)
2. If you plan to rent for a year or two as you travel around and then come back home and live in the home for at least two more years after your travel period you could convert the home to a rental and then back to a home after redomicling in it reseting it as your personel residence. This negates a lot of the negitives in point one but does lock you into comeing back to that house again you'll want to verify the tax rules on this on the timing as I've been out of the tax business for a couple of years now.
3. This though is the biggie. Tenets are horrible people. I've had them throw things down the toilets to the point that we had to replace the run to the sewer. I've had them not tell me about water leaks in the house until thousands of dollars worth of damage were done. I've had them gouge holes in the walls. I don't own rental properties any more. I made a fair amount of money while I did but I didn't have the right mentality to do it. If you have someone you trust to rent too, or a house in a nice area that you can rent for enough money to make the risk worth it then maybe otherwise I'd just sell or get a house sitter that again was someone you trusted and even then I'd just sell. Houses sitting vacent are magnets for the worst dregs of human society.
Mallo
1. Check with a couple CPAs unless you have one you've used for a long time. Also you might want to look for a fee based financial planner who will charge you a consulting fee. The advantage is they can help you figure out what is your best option considering your overall financial goals.
2. In order to qualify for the exemption from capital gains tax on the sale of your principal residence, you must have lived there 24 of the 60 months prior to the sale of the property. The months need not be consecutive. At least that is the rule today. So you could rent your house while you are on the road and then move back in prior to the sale of the property.
3. It can make quite a difference how you are paid for the living expenses / per diem part of your wages. If it is paid as part of your salary straight up then much of your travel expenses are considered "business expenses" and reduce your income. If they are paid as per diem -- then they are considered differently and it gets much more complicated. But I don't think it has any relevance whether you rent your current residence or not... Again, check with a couple CPA types.
4. If you have a loan on your RV, the interest is deductible regardless of whether you sell or rent your current home...
5. If you do rent your current home I strongly recommend having a local property manager. It will cost you a little bit, but you really need someone who can handle things locally. It can help pervent a lot of the tenant problems previously mentioned.
-- Edited by Ckerr on Thursday 5th of August 2010 01:20:28 PM
OK I see where he's going now with these statements he's looking to write off the employee business expenses vs the income / expenses of renting as being a better deal.
There are a couple of things in this that should be broken out as seperate threads.
1. The house is meaningless as far as setting your tax home and if your away from home.
A. He's trying to avoid you changing tax homes to whatever state your working in by having you hold the house as a domicle but the IRS does not require that there are a number of tests the house is but one of them and if I remember the wording correctly it's "Owns property in". So there shouldn't be an issue in renting the one house and living in your second house at the job site (remember your RV counts as a second home.). You can use a mail forwarding service and count that as Tax home from a federal standpoint your OK it's the state stand points that get tricky see 2.
B. Even with all this there is still the aspect of how your paid. If your paid on a 1099 then every dime you spend near the new job counts as a deduction off a schedule C but you end up paying both halves of social security. If your paid on a W-2 basis then what is and isn't deductable depends on how far from your tax home the job is but even then there is a limit that if your away from your tax home more then a set amount of time (18 months) your move is considered a perm change in tax home.
2. Residency and the State of New Mexico. Why? Why not change your domicle state to Texas or SD or Florida or.... insert your prefered tax haven here.
A. If your not in New Mexico your looking at a complex multi state fileing weather your tax home is in New Mexico or not. Let's say each contract is for three months that means it's possible that you could work in 4 states in a given year and owe state taxes to all four states (it's pro-rated but the forms can be complex) but if you maintain that your a resident of New Mexico you will also have to pull all that income back to New Mexico where you will then be able to claim credits for the taxes paid in other states on the same income. It will get complicated fast I've done a lot of these for people.
B. Moving to a tax haven state at least clears out that pull back you just have to do your multiple non resident / part year resident returns.
This is why I am from Madison SD. My job is based in PA and every day I spend in PA counts as a day in that I owe them taxes for but as long as I don't stay in PA long enough to trigger residency there (or long enough in any other state to trigger residency) the PA dept of Revenue can't force me to declare my full income to the state of PA and I can pro-rate with SD.
Yours will be more complex in that you have to go to a site so avoiding state taxes is going to be hard but simplifying them is possible.
Mallo
Desertnurse, are you traveling now? My wife and I are both nurses in ABQ. She has travel nursed before, I don't have the personality for that, but I can easily imagine getting a PRN job in CA and traveling to it again and again. Also, my boss has told me if I went PRN I could work 4 days in a row at the end and beginning of every other month (ie Sept 29,30, Oct 1,2, then Nov29,30, Dec 1,2) and keep my job. I don't know if I will bother, but it gives me some emotional security, and it has some meaning in terms of my pension.
Tax wise NM does not impress me. When I moved here 7 years ago they taxed me for everything I made that year in CA (which I had already paid CA state taxes on.) State taxes aren't huge, but I have been told most states don't do that. If we don't own here, we will probably get residency in a different state, one we don't plan on (my wife) working in so those housing allowances can stay tax free!
Good luck!
Pinon