In the fast-paced world of real estate marketing, leveraging social media content has become essential for agents to attract clients and grow their businesses.
But did you know that you can also use a unique tax strategy called “The Augusta Rule” to save money while creating engaging content for your sphere?
This article will guide you through the ins and outs of this strategy and show you how you can save meaningful tax dollars for your real estate sales business, all while simply documenting and taking credit for the content marketing that you are already doing today.
The Story Behind “The Augusta Rule”
“The Augusta Rule” gets its name from the renowned Master’s Tournament held in Augusta, Georgia.
During this event, local residents saw an opportunity to earn extra income by renting out their homes to visitors from around the globe who needed a place to stay.
Now, here’s where the tax advantage comes in.
Typically, rental income must be reported and taxed. However, the Augusta Rule allows homeowners to rent out their primary residence for up to 14 days per year without having to report or pay taxes on the rental income.
Understanding “The Augusta Rule”
“The Augusta Rule,” officially known as IRC Section 280A(g), provides a unique opportunity for business owners, like real estate agents, to benefit from additional tax advantages by renting out their primary residence to their business.
By doing so, you can claim a deduction for your business and receive that same rental income tax-free to you personally, resulting in a one-sided tax benefit.
Utilizing “The Augusta Rule” for Content Creation
Traditionally, the Augusta Rule has been used for hosting mastermind events or shareholder meetings to take advantage of this business deduction.
And these are still completely valid uses of the rule!
However, with the rise of content creation as a powerful marketing strategy, real estate agents can now also apply the rule in a new way, by renting out their home to their real estate business for production space.
Whether you’re shooting videos for your YouTube channel, creating Instagram Reels, or conducting client interviews, your home can serve as a production space. By having your business pay you for using your space, you can claim a deduction for it while excluding the rental income from your tax return.
Meeting the Requirements for “The Augusta Rule”
The first place to start if you are considering taking advantage of “The Augusta Rule” as a tax strategy is to engage your Certified Public Accountant (CPA) in the conversation to understand the specific details and ensure compliance with the applicable rules.
That said, here are a handful of items you will want to discuss with them to get the conversation started:
- Show Legitimate Business Purpose: Establish a lawful business transaction between your business and yourself, operating as an S-corporation, partnership, or C-corporation. This is not applicable to disregarded entities like single-member LLCs treated as sole proprietorships.
- Determine Fair Rental Fee: Research local rental prices in your area to determine a fair rental fee for your space. Platforms like Airbnb or VRBO can provide insights and support your claim in the event that you were to be audited.
- Create an Official Invoice: Generate an invoice from your name to your business, detailing the date, description, and rental fee of the space. Proper invoicing is crucial for accurate bookkeeping and successful tax deductions.
- File a 1099-MISC Form: Report the rental income at the business level by filing a 1099-MISC form. This ensures compliance with IRS reporting requirements and excludes the income from your personal income tax return.
BONUS: Need a process to track the eligible business uses of your home? Click here to download our free template.
Now, let’s see just how “The Augusta Rule” can save you on taxes. Suppose you batch film video content at your home for one day per month, totaling 12 days in a year. If the fair rental fee for your home is $400 per day, you would have a total rental income of $4,800, deductible to your real estate business. Your income level and tax bracket will determine just how much of a tax savings this is.
For example, if you are a single tax filer and your net business income is $250k, you would fall into the 32% marginal income tax bracket. This makes the $4,800 deduction that you created by using the Augusta Rule worth $1,536 of tax savings. All because you simply documented and got credit for a marketing strategy you were doing already.
To recap, real estate agents have a valuable opportunity to save on taxes by leveraging “The Augusta Rule” in their content creation efforts.
By using your home as a production space and ensuring compliance with the necessary requirements, you can claim deductions while excluding rental income.
Remember to consult with your CPA to ensure you are following all IRS guidelines and making the most of this tax strategy.
So, if this tax strategy sounds applicable to you, start utilizing “The Augusta Rule” today and turn your content creation into a tax advantage for your real estate business.
Here are some additional tips for using “The Augusta Rule” for content creation:
- Make sure your content is high-quality and engaging. The better your content is, the more likely it is that your business will benefit from the tax deduction.
- Track your expenses. Keep track of all of the expenses associated with creating your content, such as the cost of equipment, supplies, and travel. These expenses can also be deducted as business expenses.
- Get creative. There are many ways to use your home as a production space for content creation. You can use your living room as a backdrop for interviews, your kitchen to film cooking demonstrations, or your backyard to shoot real estate videos.
By following these tips, you can use “The Augusta Rule” to save money on taxes and grow your real estate business.