The Augusta Rule

Rent your home out for up to 14 days per year without having to report the rental income on your tax return.

What Is The Augusta Rule?

The Augusta Rule derives its name from Augusta, Georgia, where the renowned Masters golf tournament takes place each year. In the 1970s, Augusta's residents advocated for a specific legislative provision that would enable them to lease their residences to visitors from outside the city during the Master's Tournament, all while avoiding the obligation to declare the rental earnings on their personal tax filings. In response to this request, the IRS implemented the Augusta Rule, allowing individuals to capitalize on this provision. Consequently, citizens throughout the United States now have the potential to leverage this rule, permitting them to rent out their homes for up to 14 days annually, free from taxation, as a potentially advantageous tax-planning strategy.

How Does The Augusta Rule Work?

Just like any tax regulations, adhering to specific criteria is essential when considering the benefits of the Augusta Rule:

1. The property being rented out must serve as the individual's personal dwelling, which includes residences like houses, mobile homes, apartments, condos, cabins, boats, and more.

2. The rental property can be the homeowner’s primary residence, secondary residence, or vacation home. 

3. Costs linked to renting out the homeowner's property to utilize the Augusta exemption cannot be claimed as tax deductions.

4. The 14-day limit within a calendar year doesn't need to be consecutive; it's cumulative. This implies that the homeowner could rent out their property for a total of 14 days throughout the year without needing to report the income from those 14 days.

5. The homeowner must establish a rental rate that aligns with the market standards for the location, time of year, and current demand.

What You Need To Do

To benefit from the Augusta tax exemption, you can simply lease your primary residence for a maximum of 14 days during the course of the calendar year, refraining from declaring the rental earnings on your personal tax filing.

However, maintaining readiness for a potential IRS audit is important. If you intend to utilize the Augusta exemption, you must possess appropriate documentation to substantiate your rental income:

1. Evidence of property ownership during the period of property rental.

2. Verification of rental rates that are in line with current market standards at the time of property rental.

3. Documentation indicating that you utilized your home as a personal residence at some point during the year.

How You Can Implement The Augusta Rule

1. Explore Upcoming Events: Spend the time to familiarize yourself with nearby events like sports games, music festivals, or seasonal hobbies that consistently draw visitors to your region. Getting a grasp of the event schedule will enable you to pinpoint possible rental intervals for your property.

2. Evaluate Demand Trends: Examine the need for temporary rentals coinciding with these events. Delve into aspects like proximity to the location, lodging availability, and price patterns to understand the feasibility and prospective profitability of your approach utilizing the Augusta Rule.

3. List your property: After researching upcoming local events and properly assessing the demand for them it is crucial to take action and list your property for rent. Create an enticing short-term rental listing for your property with professional photography and a well-written listing description. You can even adapt the listing for the time of year or to highlight a particular upcoming event.

The Augusta Rule offers a fantastic chance to make the most of your real estate by enhancing your tax circumstances. By skillfully utilizing this tactic, you can tap into your property's potential and attain substantial financial benefits.