Hello, we are happy to hear that you found this helpful! If you'd like more info or want to meet with someone from our team, shoot us an email at team@cleverprofits.com!
IRS states it is NOT deductable by your business and tax free to you. Per IRS Pub 538 on accounting methods: "Related Persons: Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income."
Thank you. I have an S-Corp and my primary home of stay is also my primary place of business. Can I still do Augusta/14 days rule. On a side note, I am reimbursing home expenses on 1120S via my S-corp accountable plan and employee expense reimbursement.
thx for explaining not just the concept but the process; makes all the difference. I was wondering about the 1099-MISC from the corp, and whether that would cause IRS to look for a Sched E. thx for explaining you should exclude it from E, with a notation about 280(a) I guess. Hopefully the related party rules don't ruin this.
You are correct, this strategy is prohibited by the IRS. Per IRS Pub 538 "Related Persons: Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income."
Hello, thanks for reaching out! Is your business solely ran online? Also, feel free to reach out to jacob@cleverprofits.com & we will get your questions answered!
Can you deduct the equivalent of per hour hotel business room in the area instead of the daily rent of a house. Meanings if an hotel charge for a meeting room $100 per hour. I use 8 hours then my write off is $800 for that day? Then take that amount and multiply by 14, Instead of the house rental is $4,000 a month to charge almost $2,000?
Hi Ross! If the property is owned by you, then yes, however - if this is not the case, would you mind providing some more context so we can determine if this would apply to you?
I read this cannot be utilized if your home is your primary place of business. I’m not sure how it would work for me, as my company rents my shop from me , but still the same street address.
at 1:25 in the video, you speak of a not reporting the rental income but "losing out on the tax deductions", what tax deductions are you losing out on for renting out your home?
Hey Marcelo! Thank you for your question! If you aren’t renting your home to anyone other than your business, you aren’t losing out on anything because you wouldn’t be eligible for any deductions to begin with. but if you are renting out your home and you want to use the Augusta Rule (14 days or less), you cannot claim rental deductions like depreciation, mortgage interest, utilities, repairs, etc. We hope that this helps, let us know if you have any further questions!
Two Questions about my wifes S-corp. We can easily have a monthly shareholder meeting and go over items and use the house as a rental space for the meeting. I have created invoices to invoice her S-corp. But what is the best rental agreement to have with her Corporation, Most are lease or month to month typical rental agreements, anything you reccommend? 2nd, I did not quite get the 1099-misc. So I have here Comapny 1099-misc for the income from the corp? How should it be noted so does not have to me declared on personal taxes?
IRS states this is NOT both deductable by your business and tax free to you. Per IRS Pub 538 on accounting methods. "Related Persons: Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income."
You cannot use your bid to include the food costs. You can however expense your actual food costs separately. Augusta rule only covers the actual cost to rent the space.
I own my property. I rent one of the room and I also run a business. Can I report the $500/month a charge on the room and still use the Augusta rule on the same property?
Yes, you can, but the Augusta rule can only be used for the portion of the home not rented by your regular tenant. So only for all other spaces that could be considered used for the business.
I’ve heard of this but was told that it was ruined by related party rules that only allow a deduction when the other party recognizes income. How do you get around that?
Hello Jace, thanks for reaching out with your question + tuning into our videos! In short, the related party rules govern timing, not exclusions. If you'd like to learn more or have future questions, feel free to reach out to team@cleverprofits.com!
You are correc, it is NOT allowed per IRS Pub 538 "Related Persons: Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income."
Junior, thanks for watching + reaching out! The unfortunate answer is, maybe. I know that's not the most concise answer but the use of only the driveway for the business would not constitute a full rental of your home for business purposes. Let us know if you have any further questions or if you'd like to jump further into this content!
Mike, thanks so much for tuning in! Stay on the lookout for more content being released soon. If you have further questions or desire more insight on any of the topics, feel free to reach out to team@cleverprofits.com!
Second question. If the business has to issue a 1099 MISC, isn't it required of the recipient of the 1099 to report that income? How do they exclude it on their 1040?
@@CleverProfits I just don't understand how it is eliminating the tax burden if they have to report the income. Expense it for the business but report the income? Can you explain?
If there is a home office, then that means the home is the primary place of business, which would automatically exclude them from using the Augusta rule.
Asking the important questions! The answer is maybe - anyone can rent their home to any business as long as there is a valid business purpose. If it's done specifically for film shoots, the issue for content creators is whether they are filming in their "home office" which would fall more in line with the home office deduction under an accountable reimbursement plan. we would reserve the Augusta Rule for film shoots done in the primary residence, but outside the home office. the key is to not double dip on a deduction! Also, another important consideration is that the IRS doesn't like the idea of beds sitting in a home office which I imagine would be a common issue for certain creators!
Hello Frank, thanks for reaching out with the questions! No more than fair market value. That's harder to define, so we recommend looking for something comparable on Airbnb and VRBO in your area!
Hello! Thank you for watching & reaching out! To the best of our knowledge, the 280A is applicable to "dwelling units", which are defined as house, apartment or condo. There is no specificity with individual rooms, so our initial interpretation would be that the 14-Day Rule applies whether you rent one room or all of the rooms. If you have further questions, feel free to reach out to team@cleverprofits.com!
