A tax professional explains the Augusta Rule, which lets you rent your home for under 14 days yearly tax-free. Homeowners near the Masters golf tournament use it. Businesses can too: hold monthly board meetings at an owner's house, deduct the rent as a business expense, while the owner reports nothing.
In this quick tip, I wanted to go over with you a beloved tax strategy that our firm has been using for a long time. We call it corporate rent. Other people have called it the Augusta Rule, both of which are terms you could Google and get a bunch of more additional information on. The reason it's called the Augusta Rule— I think this story helps explain A little bit of how the rule is gonna work. So Augusta, Georgia is where they have the Masters Golf Tournament every single year. And during that time period, they get an influx of like 100,000+ extra bodies. And it might be even 200,000. I don't know the exact number, but it's a gigantic influx. Well, so these owners of homes down there They are like, wow, I can make some money here if I rent out my house. So they rent out their house, they get income from that, and it's called the Augusta Rules because the income that they receive from renting their house isn't taxable income to them. Why is that? Well, this is why we call it the Augusta Rule, because they get to take advantage of it. The tax rules say that if you have a rental or a property, it has to be real estate, if you have real estate and you rent it out for less than 14 days in a calendar year, so January to December, if you rent it out less than 14 days, you are not required to pick up any income that you may have received from renting it. Now if you rent it out for a 15th day and above, Then whatever you receive is, you have to report it as rental income. So we take this Augusta rule and we say, well, your gym or your fitness studio, that could do the same thing. So how about we have your business contract with you as a person to have a monthly board meeting at your house? That would equal 12 days each year. You do a quick search on Airbnb or other home rental type of websites and find a market rate. Whatever that market rate is, that's what you can charge your business. That becomes a rent expense tax deduction on your business return that you're not required to pick up as rental income on your personal return. So they call it the Augusta Rule. We like to call it corporate rent. If you want more information on this, please look at us as a resource. We'd be happy to help. And if this is a tip you liked, please share it with others and subscribe to our YouTube channel. All right, we'll see you later.
