Are you curious about AirBnB-ing your home? Maybe you’re considering getting a investment property you can turn into a rental.
You can put a toe in the water using The Augusta Rule.
Quick Definition
Under the Augusta Rule, homeowners who rent out their homes for fewer than 15 days in a year can exclude the rental income from their taxable income, regardless of how much they earn from the rental.
This means that homeowners can rent out their homes during major events in their area (such as the Masters, hence the name) and not have to pay taxes on the rental income they earn.
The wild part is you can still deduct expenses incurred from this renting it out (e.g. cleaning fees, advertising).
Not Just for AirBnB
Some people use this for business meetings, too. Specifically, they rent out to their own business in order to convert some business cash into untaxed income.
But you can’t fake it. If you do this, you have to actually substantiate te
- Have the business provide a 1099-MISC
- Keep meeting notes and relevant records for what went on. If you’re using this for an actual offsite/retreat, that shouldn’t be hard
- You can do it for each property you own
- It has to be a reasonable amount (i.e. market rate for the area)
- Properties must be in the US
There’s some debate on if this rule applies to businesses. The IRS doesn’t offer explicit guidance, but people definitely use the rule this way today. But just a heads up that can change anytime.
If you’re at this level, I’d probably recommend getting an accountant anyway.
