What is the Augusta Rule (14-Day Rule, IRC Section 280A)?

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How it works

To utilize the Augusta Rule, the property in question must be classified as the owner's residence, meaning they use it for personal purposes for more than 14 days a year or more than 10% of the days it's rented out. The owner can then rent the residence for a total of 14 days or less throughout the calendar year; these days do not need to be consecutive.

The income earned from these rental days is not reported to the IRS. Owners must keep meticulous records of rental days to prove eligibility.

If the property is rented for 15 or more days, all rental income for the entire year must be reported on Schedule E of their tax return.

Why it matters

The Augusta Rule is highly relevant for homeowners and part-time vacation rental hosts looking to generate supplemental income tax-free. It is particularly advantageous for those living in areas that host major sporting events, festivals, or conferences, which create short bursts of high rental demand.

Understanding and using this rule correctly allows property owners to capitalize on these opportunities without the burden of complex tax reporting for minor rental activity. It's a key piece of tax legislation that directly impacts the financial strategy of occasional short-term renting.

Examples

• A family living in Miami rents their home to tourists for the 5 days surrounding the Super Bowl. The income earned is exempt from federal income tax according to IRC Section 280A.
• A homeowner in Augusta, Georgia, rents their primary residence for 10 days during the Masters golf tournament for $20,000. Under the Augusta Rule, this income is not federally taxable.
• The owner of a ski chalet in Vermont, which they use as a second home for most of the winter, rents it out for two separate weeks (14 total days) during a local winter carnival. They do not have to report the rental revenue to the IRS.
• An individual rents out a spare room in their apartment on Airbnb for a total of 30 days over the course of a year. They cannot use the Augusta Rule because the rental period exceeds 14 days, and all income must be reported on their tax return.