This is a YouTube video titled "Self-Rental Rules: How To Rent Your House To Your Business" containing a conversation recorded in February 2024. The discussion features Jim Dahle and Joe talking about the tax strategy known as the Augusta rule or 14-day rental rule, explaining how individuals can rent their primary residence to their business for up to 14 days tax-free. They cover practical advice on determining reasonable rental rates and audit considerations, with Jim Dahle sharing his personal approach to the strategy.
Self rentals. You know, basically you are renting for example your home to your business. Tell us how this works and, and when you've gone too far.
Yep. The, some of you might know as Augusta rule or the 14 day rental rule. It was called the, it's called the Augusta rule because it originated in Augusta, Georgia where the Masters are at and actually have some clients that do this. They rent their home for two weeks during that master's and they get 30, $40,000 in income and they don't have to pay any tax on that income. So basically if you keep your home under rent, your home to your business for this 14 days or less, it doesn't have to be consecutive. Your business gets a deduction for the rent and then you as individual don't have to pay tax on that income. So and it has to be a primary residence. So that's one of the catches. It can't be other like a, like a, another rental property or anything. It has to be a personal residence. And one area that I've seen people get in trouble besides, you know, not using the proper home is that they try to do too big of a reasonable rental rate. So there's definitely, I mean I've seen this strategy so much on like TikTok and social media and I'm a little more conservative, conservative in this area when it comes to the determining reasonable rental rate. But you can look at comparable Airbnbs, you can also look at conference rooms in the area like Regis centers or hotels, et cetera. And what I like to do is get a, a price per square foot of what a one day rental would be for something like that and get like two or three of them, average them out. And what a lot of people will do though is they'll take like a super nice Airbnb and say oh, it's you know, two, $3,000, you know, to rent for the week or the month or something. And it, it's not comparable to their home or they try to do it for the entire house as well. I tend to go and say hey, get that price per square foot, that average and then apply it to the areas that you're using. So like I don't include my home office because I'm doing my home office deduction. I don't include the upstairs where my kids bedrooms are at and like the playroom. I just do it for like the kitchen, the living room, hallway to the bathroom, things like that. And so that's definitely a lot more conservative than other people. But I always try to look at things from the eyes of an auditor. And so, like, for example, if I tried to include my home office, they'd be like, well, that's. I can see that as being double dipping. And so, so, yeah, that. That's kind of my, My, My take around it.
Yeah. And that's how we've done it is comparable Airbnbs. We actually print them out on the day, you know, that meeting was and keep them and keep those in file in the event we're ever audited. But I think I might actually be more aggressive on this one than you are. I generally have used the whole house. I've not tried to limit it to whatever space was touched for the meetings we have. WCI doesn't have a headquarters outside of my house, and so that's what we've done there.
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