Section 280A of the Internal Revenue Code lets you rent out your home for up to 14 days per year without having to report the income. The tax exemption is one of the rare opportunities to earn money and not pay federal income tax on it.
Sometimes referred to as the Augusta, or Masters Rule by those who rent out their homes in Augusta, Ga., during the annual golf tournament, the exemption is also utilized by residents of Super Bowl host cities, music festivals, conventions, and other major events.
This rule also opens the door to renting your home to your business, paying a “reasonable” deductible rent out of the business account, and then treating it as non-taxable income. You can rent your home for all sorts of purposes, including business meetings, employee events, and even a limited amount of employee entertainment.
You will need to document the use of your home and show that the rent you charge is reasonable. Get quotes from hotels, business retreats, country clubs or similar venues for use of their meeting facilities. Document your business use and keep records of who attended the meeting (minutes) or event and your business relationship with them.
Although you can’t deduct direct costs, like utilities that result from the rental, you can usually take a deduction for home mortgage interest and property taxes.
Remember to limit the number of days you rent to no more than 14 per year! If you exceed the limit – even it’s by one day- the two week exemption goes away and all the money made must be reported!