The Augusta Rule is an income tax loophole that allows you to shift your business’s taxable business income to tax-free personal income.
If you’re a golfer, then you know the Masters Tournament is held every year in Augusta, Georgia. Like the Super Bowl or the Olympics, the Masters draws a lot of visitors who are always looking for comfortable lodging close to the action.
Back in the 1970s, wealthy homeowners near the course started renting their homes during the tournament, and they lobbied for that income to be tax-free since their homes weren’t full-time rental properties.
The result? When you rent your personal home for up to 14 days per year, that income is not taxable. This is true even if you rent the home to a business you own.
So next time you need to hold a corporate meeting or a team training, do it in your home rather than at your office and have your business make out a check to you for renting your home.
You can claim the rental expense for your business, as long as you document the business use and confirm that it was a reasonable rate. You can find comparable rates by getting quotes for hotel event spaces or even Airbnb rentals in the area.
And as long as you don’t rent your home for more than 14 days per year, you’ll be able to take the business expense without having to report the money as rental income on your personal tax return.
A tax-deductible write-off for your business and tax-free personal income equals a win/win situation for you. We advise our clients to have one monthly company meeting at their home, which equals a total of 12 rental days.
If you rent your home to your business for $1,000 for each meeting, that’s $12,000 in income that you just shifted from taxable income to tax-free income.
If you’d like to see if this tax strategy will work for you, you can book a FREE consultation to learn more! You could easily save thousands of dollars in federal and state income taxes each and every year with this one simple strategy.
How would you like to make your next family vacation a tax-deductible business expense?
If you’re as busy as most self -employed dentists, finding time for a vacation can be a challenge...
But by planning both business and pleasure time into the same trip, you can turn many of your personal travel expenses into tax-deductible business expenses.
There are a lot of expenses that you can make deductible for tax purposes...
Travel expenses for flights, car rentals, or vehicle expenses can all be deducted. So can lodging and 50% of meal expenses that are related to your business transactions.
However, there are several rules you need to follow to take advantage of this strategy, so it’s best if you plan your travel with your tax strategist.
For example, you need to be conducting business the majority of the time in order to deduct a trip as a business expense. The IRS measures time in days, meaning you’d need to spend at least 4 days out of a one week trip mainly on business if your destination is in the US.
The rules aren’t as strict for international business trips. Business only needs to be 25% of your trip if your destination is outside of the US. That makes a trip to the beach in Mexico sound even better, doesn’t it? :)
Traveling to and from your destination is considered a necessary part of a business trip, so that already gives you two days to use for business purposes.
If you’re in meetings or attending a conference on other days, those days would be considered business as well. And theres's no reason you can't enjoy some R&R after hours.
You can also have days that are just for personal or family adventures. You just can’t deduct any of the expenses you incur on those days.
If you’re bringing the family along on the trip, just make sure your expenses are "necessary and ordinary." You can deduct the cost of a single room, but not the cost of a family-sized suite, for example.
As long as you document what you’re doing, you can go ahead and rent the suite and only deduct the portion that coincides with a single-room rate.
By incorporating business activities into your next family vacation, you could make a significant portion of your family’s travel expenses tax deductible.
Would you like expert help implementing this strategy for your business?
I’ll show you how to plan your next family vacation to where it will give you $5,000-10,000 or more in tax deductions.
William Gonzalez, MBA AFSP