With the Masters golf tournament taking place in Augusta, GA this weekend and the U.S. Open coming to Oakmont later this year, there is a relatively unknown income tax benefit that homeowners in these areas can enjoy if they should rent their homes out during these events.
The Masters Rule
Also known as the “Masters Rule,” Internal Revenue Code Section (IRC) Section 280(A)(g) generally provides that if a dwelling unit is used during a taxable year by the taxpayer as a residence, and such dwelling unit is actually rented for fewer than 15 days during the taxable year, then – no deductions are allowed related to the rental expenses incurred, and the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer.
Rule Requirements
The above rule allows you to pocket the rental income received, and it is exempt from federal income tax, so long as the property qualifies as your residence, and it is rented for fewer than 15 days during the year. If you should satisfy the straightforward statutory requirements, the exclusion will apply regardless of the amount of rental income that you collect and receive.
Of course, there are many other factors that need to be taken into consideration before you enter into such an arrangement, including, but not limited to, the payment of commissions and other costs, drafting appropriate legal agreements, finding alternative living arrangements, and state and local tax implications.
This rule can become beneficial to many homeowners living near venues where major events will be taking place over the coming years on a regular basis.
While short-term rental arrangements may be common in areas where professional golf tournaments are frequently held, the rule could apply to other potential situations where interested parties are in need of property to rent for a short period of time.
Of course, you should seek the advice of a tax professional before you engage in such an arrangement.
Please contact your Schneider Downs representative or any member of our team to discuss the implications of how this rule may impact you if you are approached to rent your home for a period of fewer than 15 days.
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