The Augusta Rule, also known as Section 280A(g) of the Internal Revenue Code, is a provision that allows homeowners in the United States to exclude up to 14 days of rental income from their taxable income each year. This means that you can rent out your home for short-term stays without having to pay taxes on the income you earn.
The rule gets its name from the city of Augusta, Georgia, where it was originally created to benefit residents who rented out their homes to attendees of the Masters golf tournament. However, the rule now applies to homeowners nationwide.
If you live somewhere that is hosting the Super Bowl for example, or some other large, well attended event, you might consider renting out your home and staying elsewhere or going on vacation yourself during that time if it could bring you $5 - $10k in tax free income. Airbnb's in Vegas could be found going for thousands of dollars per night as Super Bowl LVIII (58) approached.
This can also be a great tax savings strategy if you own your own business, and can rent your home for office parties, staff retreats, or business meetings. Then it becomes a tax deduction for your business, with no requirement to claim the income on your personal return.
Here are some key things to know about the Augusta Rule:
It only applies to personal residences. You cannot use the rule to exclude rental income from a property that you use primarily for business purposes.
The 14-day limit is per calendar year. This means that you can rent out your home for up to 14 days in any given year, regardless of how many times you rent it out.
You must still report the rental income on your tax return, even if it is exempt from tax. However, you can use Form 8829 to exclude the income from your taxable income.
There are some other limitations and exceptions to the rule. For example, the rule does not apply if you rent out your home to a relative for less than fair market value.
It is important to consult with a tax advisor to see if the Augusta Rule applies to your situation and to make sure you are complying with all of the rules and regulations.