Real Estate Investment Taxes: The Augusta Rule

Real Estate Investment Taxes: The Augusta Rule

Leasing out a piece of property can be an excellent way to make a little extra money throughout the year. Indeed, if you have a long-term tenant in place, you can end up with hundreds or even thousands of extra dollars going into your bank account each month.

Unfortunately, however, when you generate income through long-term rentals such as this, the IRS will eventually want their slice of the pie. Of course, you can usually work with your accountant to deduct expenses such as repairs and maintenance to reduce your tax liability, but you will eventually need to pay what's owed.

Though there is little that you can do to escape the IRS when leasing on a long-term basis, things can be very different if you rent out your property for just a few days a year. Tax legislation, known to real estate CPAs across the country as the "Augusta Rule," allows you to possibly exclude up to 14 days of rental income from your taxes each year. In other words, you may be able to rent out your home without needing to pay taxes on the money earned.

There are a number of situations and scenarios where this rule may come in useful. However, the most common uses that our team of Atlanta rental property accountants sees on a regular basis are:

Airbnb Rental Investment Properties

The Augusta Rule can prove to be particularly helpful if you plan on renting your home out on a platform such as Airbnb for just a few days during the year. For instance, if a major event such as the Super Bowl or Comic-Con is taking place in your city, you may decide to rent out your home (or a few rooms in it) to individuals or groups who are visiting your town to attend the event.

If your home is located particularly close to the location where the event is taking place, you may be able to make a significant amount of income over the course of just a few days. Thanks to the Augusta Rule, you may not need to pay any taxes on this money - though it is always a good idea to consult with our knowledgeable accountants first, just to make sure that this applies to you.

Business Meetings

The Augusta Rule can also be particularly useful if you happen to own a business that is separate from your rental property. If so, the rule allows you to rent the home to the business for the purposes of a meeting or conference - as opposed to having the business rent out a restaurant or hotel conference room.

According to the IRS topic number 415 (renting residential and vacation property), the business is usually able to pay you for the use of your property and make the associated deductions to reduce its tax liability. At the same time, the Augusta Rule means that you should be able to exclude that income from your personal income taxes at the end of the year - as long as total rental time remains under the 14-day threshold. As always, you should consult with one of our experienced Atlanta real estate CPAs before making any financial decisions.

Here at Fusion CPA, our team of Atlanta rental property tax planning experts has been helping property owners with their taxes for years. We have the skill and experience necessary to help you make use of regulations such as the Augusta Rule to reduce your overall tax liability. So what are you waiting for? Contact us today to learn more about how Fusion CPA can help you.

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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.