The Augusta Rule, the one thing I like about golf...

I hate golf...'hate' may not be a strong enough word. If I told you that the last time I played, I left with fewer clubs than I got there with, it would be a stone cold fact.

The Augusta Rule, also known as Section 280A(g) of the Internal Revenue Code, allows homeowners to rent out their personal residence for up to 14 days per year without having to claim any of it on their tax return. It's called the Augusta Rule because during the Masters golf tournament in Augusta, Georgia, residents would rent out their homes to attendees of the event.

This provision is particularly beneficial for anyone who live in areas where major events occur, such as golf tournaments, festivals, or conventions, which can drive up short-term rental demand.

Key Points of the Augusta Rule

• 14-Day Limit: The property can be rented out for a maximum of 14 days in a calendar year.
• Personal Residence: It applies to personal residences, including primary homes and vacation homes.
• Tax-Free Income: Rental income earned during these 14 days does not need to be reported on your tax return or claimed as income.
• Expenses: Although the income generated through this rule is not taxable, the expenses related to the rental period cannot be deducted.

To qualify for the Augusta Rule, you must meet the following criteria:

• The property must be your personal residence.
• The rental period must not exceed 14 days in a calendar year.
• You must not claim any rental-related expenses on your tax return.

This strategy is awesome in and of itself, but how about we add some jet fuel...

What if your business needs some space to have it's monthly strategy meeting? I'm pretty sure your personal residence may be available, no?

Think about it, the business gets a deduction and you don't have to report the amount you're paid!!!!

Key Conditions to Meet when utilizing the Augusta Rule and renting to your business:

• 14-Day Limit: The property can be rented out for a maximum of 14 days in a calendar year.
• Fair Market Rent: The rental rate charged to your business must be at fair market value. It should be comparable to what you would charge an unrelated third party.
• Business Purpose: The rental must be for a legitimate business purpose, such as hosting meetings, events, or other business activities.
• Documentation: Proper documentation should be maintained, including rental agreements, invoices, and evidence of the business use of the property.

Example Scenario

Suppose you own a consulting business and decide to rent out your home for 10 days to host a series of business meetings. You charge your business $700 per day, which is the fair market rate for similar properties in your area. Under the Augusta Rule, you can earn $7,000 in rental income tax-free, and you do not need to report this income on your tax return.

As with anything IRS-related, there are details involved. Talk with your Tax Advisor to ensure you're following the steps necessary to do this the right way...

Mike