If you’ve followed this website or our blog Fifth Wheel PT for any length of time, you probably know that I have spent a lot of time learning and writing about personal finance and investing since graduating from physical therapy school in 2015. This focus on maximizing my finances led to me reaching financial independence at age 30 and retiring from full time work as a PT.
Pursuing Travel PT as a new grad to earn significantly more than at a normal permanent job was a huge part of achieving that milestone as such a young age, but even more important than that was keeping my expenses as low as reasonably possible while traveling. As a travel therapist or other travel healthcare provider, you have to look at your savings rate, which takes into account not only your income but also your expenses, to see the big picture on how to come out ahead financially.
As a traditional travel healthcare provider, traveling with a tax home in order to receive tax free stipends, often the biggest monthly expense is housing, and this was no different for me. This is because having to pay for short term housing at the travel assignment location in addition to paying for housing expenses back home can really add up quickly.
There are some ways to reduce the expense of short term housing at your travel assignment location, but for the most part options are usually pretty limited depending on the area of your travel job. On the other hand, there are a variety of ways to reduce the total cost of maintaining your permanent tax home while on assignment by house hacking. Using some of these techniques allowed me to save a lot of money over the years, so I want to share some insights with you to help you better reduce your expenses and make travel healthcare more lucrative.
What is House Hacking?
House hacking is basically utilizing a portion or all of your house to earn income or offset expenses. Chad Carson does a great job of explaining all of the various ways of house hacking in this article. Anyone that has ever lived with a roommate has done a version of house hacking in the past. Having a two bedroom house or apartment split between two people is always going to be cheaper than having a one bedroom house or apartment to yourself, due to not only being able to split the cost of the rent or mortgage, but also utilities and any additional costs/fees.
Personally, I’ve been learning about ways to “hack” my housing costs since high school. I can remember looking at duplexes for sale when I was 18 and doing calculations on how much I could reduce my expenses by buying one, living in one side and renting the other, while also having a roommate in my side. I determined that not only could I reduce my housing costs, but I could actually live for free while simultaneously paying down the mortgage on the property by doing this in my hometown. Although I never ended up doing this after graduating high school due to going away for college, followed by PT school and then travel therapy, it’s something I still think about doing in the future.
House Hacking for Travelers
There are a few different ways that a travel healthcare provider might choose to house hack their tax home to reduce costs.
The first and most simple way is by simply renting a room in a house as their tax home, instead of having an entire house or apartment. Realistically, most travelers spend very little time throughout the year at their tax home due to spending most of the year working travel assignments or traveling for fun domestically or internationally. For my and Whitney’s entire travel careers prior to COVID, we never spent more than 6 weeks at home in any given year. Having a house or apartment sit empty for most of the year seemed wasteful to us, so for the majority of that time we each chose to rent a room in our family’s house as our tax home instead. We still had a place to keep all of our stuff and stay for the short periods while we were home, but it cost much less. We also had someone to collect our mail and keep an eye on things while we were gone.
Another way to house hack as a traveler is to buy or rent a place bigger than you’d need, and rent out rooms or get roommates to help subsidize costs. This is exactly what I had in mind when we were looking at townhouses to buy in our hometown when COVID hit and we realized we would be at home much more. We purposely bought a place with a couple of extra bedrooms so that we could have roommates or short term renters while we were out of town. By buying (or renting) an affordable place and renting out extra rooms for part or all of the year, it’s easy to make a big dent in the monthly cost of your tax home.
The last main way to house hack as a travel healthcare provider is by renting out your entire house or apartment on Airbnb, VRBO, or Furnished Finder while you’re away on assignment. This will undoubtedly offset tax home costs the most, assuming you’re able to keep occupancy relatively high, but will also lead to the most hassle. Managing a short term rental can be very lucrative but hard to manage from a distance while working. But, with a good property manager in your area that you trust, it’s certainly possible to make it work. We considered doing this when we were looking at places to buy, but ultimately decided against it due to the potential headache and issues that could arise. We also didn’t really like the idea of renting out our whole place with other people having access to our stuff. I do know a couple of travelers that have done this in the past and had a good experience along with making a decent profit though.
What About Maintaining Your Tax Home Requirements?
You may be wondering how house hacking impacts your tax home status and eligibility for tax free stipends as a travel therapist/travel healthcare provider. This is an important question to consider, and the answer depends on which of the strategies above that you choose and how you structure it.
**I do want to put the disclaimer here that I am by no means a CPA or tax professional. It’s always worth consulting a tax professional before making any decisions on your personal tax home situation. Below is my current understanding of how this works based on research I’ve done and CPAs I’ve talked to in the past. We interviewed Joe Smith from Travel Tax a couple of years ago and asked him for his advice on this as well which you can find here starting at 1:05:30 in the video.
As a quick refresher, according to the IRS, these are the rules for maintaining a tax home:
- You must maintain a place of permanent residence and pay expenses there (i.e. rent, own/mortgage, pay bills, pay taxes, etc.) while ALSO paying expenses at your travel location. This is called “duplicating expenses.”
- You must not abandon your tax home. Generally speaking, you should return there at least 30 days per year but these days don’t have to be consecutive.
- You must still conduct business in the area of your tax home. For example, you have a PRN job there or maintain some type of other business there.
Ideally you’d want to meet all three of these criteria but at the very least 2/3.
If you’re renting a room in a house as your tax home to house hack and save money, there should be absolutely no issue with that from a tax home perspective. Many travelers rent a room in a house or apartment from a friend or family member in their home area, keep records of payment and a lease, return to the area at least 30 days per year, and keep all of their stuff there.
If you’re renting out rooms to short term renters or roommates in a house or apartment that you own/lease, there should be no issue with this either as long as you’re keeping at least one bedroom in the house as your own. Obviously if you’re renting all of the bedrooms out in your house for the full year then this would no longer count as your tax home because you aren’t personally meeting the tax home rules above.
If you’re renting out your entire house or apartment on Airbnb, VRBO, Furnished Finder, or something similar, then that’s fine as long as you aren’t renting it out for the full year. You need to leave open time in the year for you to return home without it being rented. Something like renting out the full place for 9 months of the year while leaving a month between each assignment where you go back home and stay for a while would be ideal. Even renting a place 9 months a year on a short term basis will likely be enough to cover nearly all of the expenses of the tax home depending on your area.
Should You House Hack Your Tax Home?
House hacking your tax home is a great way to reduce your expenses while traveling to improve your financial situation more quickly. This was a key part in my own journey to achieving financial independence. With that being said, there’s undoubtedly more hassle and potential issues that go along with sharing or renting out your tax home. For that reason, it’s definitely not for all travelers. If you’re the type of traveler that gets stressed and overwhelmed easily while on assignment, then adding in extra worry back home may not be worth it. On the other hand, if you’re the type of traveler that handles potential issues well and is looking to minimize your expenses as much as possible, then house hacking could be perfect for you.
Have you ever done some version of house hacking with your tax home as a healthcare traveler? If so let me know what you did and how it went in the comments below or in an email!
As always, if you have questions about your travel healthcare journey, you can send us a message. If you’re new to travel healthcare and want to get connected with travel therapy recruiters and companies we recommend, you can fill out this form as well.
Related Articles:
- Tax Homes 101 for Healthcare Travelers
- Focusing on Savings Rate instead of Only the Highest Pay as a Travel Therapist
- 8 Lessons Learned After 6 Years as a Travel Therapist
Jared has been a traveling physical therapist since 2015 and has helped thousands of current and aspiring travelers along their own journeys. He is also a personal finance enthusiast and has used his career as a Travel PT combined with strategic financial choices to pursue financial independence and semi-retirement early in his career.
