The Master’s and Tax Free Income: A Tradition Unlike Any Other
You might know the Masters golf tournament for its green jackets, pimento cheese sandwiches, and incredible performances (Tiger in 2019 comes to mind). Interestingly enough, the Masters is actually responsible for a real estate tax loophole for all homeowners. This isn't an exaggeration or clickbait.
There was a real estate tax loophole created by a group of influential lobbyists, mostly from Augusta, Georgia, in the 1970s. These wealthy individuals had been renting their mansions to golfers and fans for years without paying taxes on the income. When some tax legislation threatened this practice, this well-connected group successfully lobbied Congress to pass the Augusta Rule.
The Augusta Rule allows you to rent out your personal residence for up to 14 days completely tax-free. It applies to both your primary residence and any vacation homes you own (Section 280A(g) of the tax code).
Initially, you might wonder how much money you can really make in two weeks. The answer is, a significant amount, depending on your location and any events happening nearby. Sticking with the Augusta theme, I found the Master's Housing Bureau, a leading source for rentals during the tournament. According to their recommended pricing, a large, high-end house close to the course could fetch up to $25,000 in a single week. Assuming these are high net worth individuals, they're likely looking at an income tax rate of around 37%. So, the Augusta Rule allows them to avoid income taxes of $9,250 just for the tournament week, and that's based on recommended pricing alone.
As with many laws, the Augusta Rule has unintended consequences. My research revealed that it's a little-known tactic for creating a corporate tax shelter. The rule doesn't specify who can rent the property, so the guest could be a corporation. Even better, if you own a corporation and a vacation home, you can seemingly rent your home to your business. The money your business pays for the accommodation becomes a business expense (tax write-off), and the rental income you receive is tax-free (under the 14-day rule). I haven't delved deeply into the legality of this strategy, and there are likely many nuances, but it appears to be happening.
While elites may benefit more from the Augusta Rule due to their property types, it applies to all homeowners. Here's how you can take advantage:
Live in a desirable location? If you're in a city or popular tourist destination, rent out your place for up to 14 days during peak seasons and generate a decent income. Use the money to offset a vacation or simply pocket the tax-free income.
Not in a popular tourist area? Look for major events happening within driving distance. For example, Boston experiences a surge in visitors during the marathon, and even towns further out can capitalize due to limited accommodations. Another example is the 2026 World Cup, which will be held in eleven US metro areas. If you live within an hour or so of a match venue, consider using the Augusta Rule.
If you're interested in learning exactly how to turn your residence into a tax-free revenue source for the World Cup, subscribe for a future how-to video. If you're enjoying this content, please like the video.
The Augusta Rule applies to all homeowners, but it's not entirely fair. Properties in highly desirable locations (on a golf course, waterfront, etc.) will generate the most tax-free income, and these are typically owned by wealthy individuals. However, my hope is that this video reaches homeowners who can utilize the Augusta Rule to improve their financial situation with a few weeks of tax-free income.
