Mastering Tax Deductions - The Augusta Rule
How proper tax planning can help you take down a piece of the prize purse in the first major championship.
Scheduled for the first full week of April, the Masters marks the begging of major championship play. Unlike the others, it is always held at the same location, Augusta National Golf Club, a private course in the southeastern United States, in the city of Augusta, Georgia.
The 2021 Master’s champion - Hideki Matsuyama took home the 1st place price worth over $2M and was photographed waiting to board a 6:45 am commercial flight from Atlanta to Chicago.
The Master’s Tournament is such a draw for fans since its start in 1934 that the $100M economic impact on the small town of Augusta can not come as a huge surprise. Some residents even began to rent out their homes to capitalize on the event and make some rental income. The topic of this post ‘The Augusta Rule’ is how everyone can potentially take advantage of this specialty tax deduction.
We mention the prize pool and economic impact to point out that this is big business. With any big business, there tend to be tax incentives that follow. This rule states that anyone can rent out his or her residence to someone else, including a corporation, for 14 days or less during a calendar year, and not report that income received from the rental.
Every year we have clients take advantage of this rule and here is one example1:
Dr. Jones owns Family Medicine LLC. She also owns a $750,000 home on a golf course that could make a great location for a corporate retreat. A 14-day corporate retreat at a home like this would cost roughly $30,000.
So when Dr. Jones comes into the office we work with her to set up a corporate retreat booked by her business Family Medicine LLC. This corporate retreat is deducted against the earnings of the business by $30,000.
Dr. Jones receives the $30,000 personally for hosting the retreat. Since this lasted for 14 days and meets the qualifications for The August Deduction she does not pay any taxes on this income.
This is more income than coming in 49th place in The Masters
2021 Prize Pool reported by CBS Sports 49th: $29,900 -- Jason Kokrak 50th: $28,980 -- Jose Maria Olazabal, Billy Horschel ($28,635)
Now it is important to document every business deduction you claim and to make sure all of this is reasonable. A qualified tax prepared would help make sure that this all meets the qualification and would be consulted before doing anything.
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Fortress Physicians by the Numbers
🏡 42 Physician Households as Clients
💰 $680,000 Avg Household Income
👩 Average Age 44
💸 $3.25 Million Net Worth
📈 29% Average Savings Rate
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