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Renting Your Home To Your Business

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Renting Your Home To Your Business

 

Section 280A(g) of the Internal Revenue Code lets you rent out your home for up to 14 days per year without even having to report the income.

This is sometimes called the “Augusta Rule” in honor of the residents of Augusta, Georgia, who rent their homes to spectators visiting to attend the annual Masters golf tournament. You’ll also see residents of Super Bowl host cities, political convention sites, music festivals, and Olympic Games host cities take advantage of the rule. And many taxpayers who live in less exotic locations take advantage of the opportunity to rent out their vacation homes when they would otherwise sit empty.

However, 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 when it hits your personal account. You can rent your home for all sorts of purposes, including business meetings, employee events, and even a limited amount of employee entertainment.

The key to making this work is to document your bona fide use of the home, and show that the rent you charge is reasonable:

  • To document your business use, keep records indicating who attended the event, and your business relationship with them. If you use the home for meetings, keep minutes or other records of the business discussion that takes place at the home.
  • To document “reasonable” rent, get quotes from hotels, country clubs, or similar venues for use of their meeting facilities.

Example: You schedule a meeting of your corporation’s Board of Directors at your home. You check into fees at local hotels and business clubs, and determine the daily rent for a comparable space is $500. Your corporation writes you a check for $500 and deducts it as “rent” on its annual return. You deposit that check into your personal account, but need not report it as income on your personal return.

 

 

 

 

 

 

 

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