Augusta, Georgia is perhaps best-known for the Masters Golf Tournament held there every year.

But did you know that the folks down in Augusta are also responsible for one of the best tax breaks for homeowners?

You see, when the golfers show up in Augusta every year, locals rent out their extra room (or whole home!) to visitors. Some smart person decided to give them a tax break on the income that is made...so long as they rent their home for less than 14 days per year.

So how can YOU take advantage of this in your business when taxes are due?

This week on Fierce Feminine Finance I want to educate you on this little-known (and quite wonderful) way to draw income out of your business tax-free!

So, as always, let’s pull this problem apart. 

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How Can Small Businesses Benefit from The Augusta Rule?

If you are earning at least $100-$200k in your business, one issue that can be a constant concern is how to reduce your tax bill. Any strategy that gives you a way to use your own home as a legitimate business expense sounds pretty cool, right?

Essentially, you need to have a true reason for your business to rent out your home or one of its rooms. Depending on your business, this could mean different things. You could utilize the space for things such as:

• Holiday parties for teams and customers

• Team events

• Meetings

• Client presentations

• Retreats

Think about what spaces you rented in the last twelve months: staff meetings, seminars, etc. Is there a space in your home that could work instead?

Your business would then pay you rental income like you would if you were renting any other space.

What Are The Restrictions Regarding The August Rule?

Alright, I know what you're thinking... Sarah, where is the catch?

First, you have to pay yourself a fair market value for renting your space. You can’t try and pay yourself $10k for a space or event that would typically only be worth $1k in your local area. That’s a big no-no. 

To avoid this, call around and get 3 quotes on the event from local venues and save these in your records in case you’re audited. 

Another restriction is that you can't take advantage of this rule if you’re a sole proprietor or single-member LLC.

You need to have an LLC or Corporation that is taxed as an S-corp, C-corp, or Partnership and set up with a separate EIN.

(Also, if you take the business use of home deduction already, you can’t take advantage of the Augusta Rule.)

You'll want to speak to a tax professional about this strategy before using it, and ensure you are doing it correctly!

In Summary

Knowing how to ethically and legally reduce your tax bill can save you thousands of dollars per year in your business.

Ready to learn more and become truly financially literate? Let's hop on a call to talk about passive income strategies so you can escape the worker bee lifestyle.