Did you know there is a unique way to earn income completely tax-free? We are not talking about some under the table cash transaction, but a legitimate way to do a short-term rental of your property, and the income you receive is completely tax free if you follow the correct process. This can be your home or a cabin property.
The Augusta Rule, named for the home of the Masters Golf Tournament, was inspired by and created for homeowners on the golf course who only turn their homes into rental properties one week a year. As a result, we all have the opportunity to rent our homes for up to 14 days a year and claim the income completely tax-free.
Here is the fine print:
Cannot exceed 14 days
The income must be reported on your tax return (Schedule E in case you are wondering).
Has to be based upon Fair Market Rent. So, no renting your place out for $25,000 a night.
However, another way to look at this is maybe if you are doing a company weekend retreat at your home (or cabin) may allow for a higher rental rate than just comparing to an AirBnB.
Document everything. This is especially true if you are a business owner and decide to have the business pay you to rent your property (lake cabin, mountain condo, acreage, etc…) You must list who was in attendance and the business purpose.
Give that a thought. Maybe there is a busy time of the year in your community that you would rather be out of town. Use that opportunity to make some tax free income.