The Masters Rule: A Guide for Homeowners

by: Daniel Cremeans
Verified by: CPA

October 10, 2023

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Each April, the worldwide golf community descends on Augusta, GA for the Masters Tournament at Augusta National Golf Club. One of golf’s four major championships, the Masters is unique in that it is the only major tournament held in the same location every year.

Every year, many local homeowners in Augusta and the surrounding communities vacate their homes, renting their homes to golfers, sponsors, officials, and fans for rates in excess of $10,000 per week. 

For many homeowners, this income is entirely tax-free due to a section of the tax code commonly referred to as the Masters Rule. Section 280A(g) of the Internal Revenue Code exempts rental income from income taxes, provided the property is rented for less than 15 days in the calendar year. 

In this overview, we outline the intricacies of the Masters Rule and share best practices homeowners should consider as they explore renting out their homes during major events. 

What is The Masters Rule?

Section 280A(g) of the Internal Revenue Code states the following:

Notwithstanding any other provision of this section or section 183, if a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then—

  1. no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and
  1. the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer under section 61.

This, in a nutshell, is the Masters Rule. Also known as the Augusta Rule, this section of the tax code allows any personal residence to be rented out for less than 15 days in a year, tax-free. 

An Example of the Masters Rule in Action

The Masters Rule is most widely used by homeowners in Augusta, GA, when the Masters Tournament takes place each April. Homeowners rent their residences out for the days leading up to the tournament and the tournament itself, often collecting rents of several thousand dollars or more. Under the Masters Rule, this is not considered taxable income. 

It’s common for homeowners to use the income they receive from renting their homes out during the Masters to improve their property for next year’s tournament. The pool of renters for these homes tends to be extremely affluent. Larger homes with luxury amenities are able to charge significantly more than smaller, less upscale homes. 

The Masters Rule is most famously applied in Augusta, GA, but can be applied anywhere. With major global events such as the 2026 World Cup and 2028 Olympic Games set to be held in the US in the coming years, the Masters Rule represents an attractive opportunity for many homeowners to earn additional income that is not subject to taxes. 

Other homeowners, such as those that live in desirable vacation destinations or cities hosting large events such as the Super Bowl, may also consider renting their home out under the Masters Rule. 

Key Considerations When Applying the Masters Rule

From a tax perspective, the Masters Rule is fairly straightforward. Provided a homeowner rents their home for less than 15 days, they do not have to report this income to the IRS on their annual tax filings. Homeowners should, however, take care to document the number of days the property was rented, as well as the associated income, in case the IRS has any questions. 

It’s also important to note that the Masters Rule is an all-or-nothing rule. If a homeowner rents their property for 15 days or more, all of the income associated with the rental(s) is considered taxable income. 

Individuals that own multiple homes which are considered residences (i.e. not investment properties, short-term rental properties, or commercial properties) can rent each of their homes out for 14 days or less in a year. A homeowner could rent out, for example, both their primary residence and their vacation home for 14 days or less each and not be liable for any tax on this income. 

While the tax benefits are clear, one barrier for many homeowners is the practicalities of renting out their home. Your home must be desirable to renters, have attractive amenities, and be located in proximity to large-scale events that attract people to travel in large volumes that exceed the capacities of existing accommodation options. 

Owners also have to vacate their home, remove their personal effects, and market their home to potential renters. For higher-end rentals, homeowners may be expected to organize daily maid service and provide other services. 

It’s also important to note that the Masters Rule only exempts homeowners from federal taxes. A homeowner’s local jurisdiction may require this income to be reported, and homeowners may be required to register and file sales and lodging tasks at the county and state levels. Additionally, local organizations such as Homeowner Associations (HOAs) may prohibit these short-term rentals. 

Smith + Howard: Experienced Real Estate Tax Advisors

The Masters Rule offers homeowners in popular destinations attractive tax benefits, but it’s not the right fit for every taxpayer. Some homes may be less suitable for short-term rentals, either due to amenities or location. In some situations, homeowners may prefer to rent their homes out for longer: the 2026 World Cup, for example, will be a month-long event. 

In these instances, there are a wide variety of other tax planning options available to homeowners and real estate investors. Individuals should explore these with the support of tax professionals that have significant experience in the complex domain of real estate tax strategy. 

At Smith + Howard, our real estate tax professionals work closely with a diverse range of private clients, investors, and fund managers to create and execute sophisticated real estate tax strategies. 

To learn more about Smith + Howard’s real estate tax planning solutions, contact an advisor today

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