IRC Section 280A(g) (also known as the "Augusta Rule"), allows homeowners to legally rent out their home to their business for up to 14 days per year resulting in a sizable tax deduction. Documentation for the deduction is vital and that's where we help.

Example of the Augusta Rule Potential Tax Savings.

If you rent your home for 14 days at a rate of $3,000 per day, $42,000 would be deducted from your corporate tax return, lowering your net business income by $42,000. If in a combined 40% tax bracket, the tax savings would be approximately $16,800 annually. Your business can deduct these rental payments on your business return, and the owner does not have to pay personal income tax as long as it qualifies under this code. This is essentially a tax-free distribution out of the company. How Does the Augusta Rule Work This sounds great, but is it too good to be true? Let's review the mechanics of how the Augusta Rule works and how Simplify365 can help you take full advantage of it.

But first, do you qualify for the Augusta Rule?

There are a couple of steps to identify if you are a candidate for this tax deduction.

1. Are you a homeowner?
If yes, you can move on to the next question.

2. Is your home your primary place of work?
You must work outside of the home in a separate office. You can move on to the third qualification if you have a separate office location.

3. Your entity type, how do you file?
You can qualify if you are a corporation (S Corp or C Corp). It gets a bit trickier if you are a Sole Proprietor, Independent Contractor, or LLC. While these entity types do not qualify, it might make sense to work with your tax professional to determine if you should establish an S Corp or an LLC filing as an S Corp.

Here is how we implement this effectively for your business.

1. You must have a business purpose to rent your personal residence to your business.
2. You must have documentation to support the business purpose.
3. You must determine fair market value for a daily rental.
These are three things that we assist business owners with through Simplify365.

We recommend taking a Simplify Planning Day

Something we embrace as a firm are consistent planning, goal setting, and having a regular schedule to check in and measure progress. We recommend business owners take a monthly Simplify Planning Day!

What is a Simplify Planning Day?

It is a monthly planning day that business owners take away from normal daily activities.

To get away from the office for a Simplify Planning Day, you could utilize a hotel to do this deep thinking, or you can use your personal residence and utilize the Augusta Rule.

However, it must start with business owners embracing a monthly dedicated day to work on the important aspects of their business. This is where we most help business owners, and it is a critical part of Augusta Rule implementation.

A Simplify Planning Day is meant to help business owners work through critical issues, such as personal and family goals, and business goals. We suggest identifying three key areas you want to work on for the day. These are things you may not typically have time for at the office, because you are so busy with your day-to-day activities.