27 Aug Temporarily Renting Your Home: The Augusta Rule… by Amanda J. Jackson

Considering Temporarily Renting Out Your Home?

Have you ever considered renting your home for a short period of time during a busy crowd-drawing event in your community? Look no further than the Augusta Rule, also known as Internal Revenue Code Section 280A (“IRC § 280A”). The Augusta Rule allows homeowners to rent their home for up to 14 days per year without being required to report the extra cash as taxable income.

The Augusta Rule’s Background

IRC § 280A was drafted to accommodate the residents of Augusta, Georgia who rent their primary residences to golfers and attendees of the Master Golf Tournament in April every year. This is why this rule is commonly referred to as the Augusta Rule. Around 250,000 people attend the tournament each year, so without the willingness of residents to temporarily rent their homes to attendees, it would have been hard for the city of Augusta to accommodate all of the visitors.

Utilizing the Augusta Rule

As previously stated, the Augusta Rule allows homeowners to rent out their residence for up to 14 days per year, with all resulting income completely exempt from income tax. There is no dollar limit to the amount of rent you can receive during the 14-day period, but the rent price cannot exceed the fair market rental value of the property. It is also important to note that if you utilize the Augusta Rule, you cannot claim any related rental expense deductions for that property.

The benefit of utilizing the Augusta Rule is not having to set up a full-fledged rental property only to rent your residence for a short period of time. The tax code regarding income derived from property rental is very stringent and it can be a nightmare to navigate in situations where the taxpayer is living in the rental property off and on while renting it, as is looked past under the Augusta Rule.

Note that the Augusta Rule applies differently to businesses seeking to rent a company-owned property. This article applies only to individual taxpayers.

Reach out to KMD for additional guidance on utilizing the Augusta Rule, and any other tax matters regarding rental properties or property acquisitions.

Written by Amanda J. Jackson, Associate Attorney at KMD Law