The Augusta Rule Tax Strategy
What is it?
Commonly referred to as the “Augusta Rule”, it is a tax savings strategy created by Title 26 of the United States Code Section 280A(g). It is an ideal tax strategy for business owners or self-employed workers. Business owners can claim up to 14 days of rent from their personal residence as tax-free income.
How can it help me save money?
By renting your home to your business for up to 14 days, you can write off the rental costs as legitimate business expenses (so long as you follow proper legal tax advice). This creates a payment to yourself that is tax free on your personal tax returns, as well as a business expense that can be deducted from your business tax liability.
Is this the same as the home office deduction?
No. Most self-employed individuals and business owners take advantage of a the home office deduction which has a limitation of $1,500 dollars of deduction ($5 per sqft up to 300 sqft annually). With the Augusta Rule, a taxpayer can write off $5,000 to $15,000 in leiu of the home office deduction.
If the Augusta Rule is better than the home office deduction, why isn’t it more common?
A few reasons play into this: 1) the Augusta Rule is a very small statute buried in the Tax Reform Act of 1976 that is difficult to properly analyze; 2) the Augusta Rule strategy is not beneficial to all taxpayer’s personal situations (such as W2 employees or other rental obligations of the residence); and 3) it is difficult to navigate the complexities of the Augusta Rule strategy without the proper guidance of a experienced and educated tax professional.
Why use us for the Augusta Rule strategy?
We specialize in tax saving strategies for business owners. We’ve researched the tax code, relevant case law, and IRS and Treasury guidelines to create a comprehensive strategy that follows the tax laws and create documentation to support the deduction against any potential audit by the IRS. We are published in International Trust Laws and Analysis (2023), the first to have a professional publication on the Augusta Rule.
