The Augusta Rule – Belk on Business – Episode 197
The Augusta Rule (IRS Section 280A) allows homeowners to rent out their primary residence as a vacation or short-term rental or rent to a business for up to 14 days per year without needing to pay tax on the rents collected. There are compliance components be able to use the rule:
1) The residence must be rented for 14 days or less during the calendar year. If rented for more than 15 days, all the rental income becomes taxable.
2) The rental amount must be reasonable – fair market value / fair rental amount.
3) Your home cannot be your primary place of business (cannot use the home office deduction and the Augusta Rule).
4) If renting to your business your business must have the right structure (cannot be a sole-proprietor or single member LLC that reports on Schedule C). Entity must be taxed as a partnership or corporation.
5) There must be a true business purpose for the rental home such as business meetings, planning or strategy sessions, recording/marketing purposes, masterminds, etc.
6) Must have substantiation of the business relationship which would include a rental contract, invoice, meeting minutes, photos, invitations, agenda, emails, etc.
7) A 1099-MISC must be issued to you personally from the business if the rents exceed $600 during the year.
8) This rule can also apply to employees or shareholders of a corporation if covered under an accountable plan.
Subscribe on these platforms:
Apple Podcast: https://apple.co/2Zp6hgj
Spotify: https://lnkd.in/gcWDnFZ
Stitcher: https://bit.ly/34aRgO2
YouTube: https://youtu.be/1jGdh5z4cL4
