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The Masters Exemption: A Hole in One

Updated: Dec 15, 2020

The 2020 Masters Tournament is here!

Last year, Tiger Woods captured the attention of America with his improbably comeback. He also walked away with his first major win in 11-years, his fifth Green Jacket, and a cool $2 million.

Funnily enough, Tiger and his competitors weren’t the only ones to walk away with a lot of dough at the end of the weekend.

The biggest winners weren’t even in Augusta for the tournament.

Residents of Augusta, Georgia are infamous for renting out their personal residences during the Masters Tournament, which is always held at Augusta National Golf Course.

For as long as the Masters Tournament has been an annual event, Augusta homeowners have been able to collect tax-free income by cashing in on short-term rentals. When Congress debated the treatment of rental income and expenses in the 1970s, Augusta residents lobbied for an exemption. The loophole is even referred to as “The Masters Exemption.”

You can find the Masters Exemption in Section 280A(g) of the Internal Revenue Code.

Simply put, if a homeowner rents out their residence for 14 days or less, none of the rental income is considered taxable.

The exemption is true regardless of the amount of money you collect! You could make $1,000 for the 14 days or you could rake in $100,000. Either way, Uncle Sam can’t take any from you!

Six-hundred-ten properties are currently listed on the Masters Housing Bureau, the official home rental program of the Masters Tournament. According to the Bureau’s suggested retail pricing, tournament patrons can expect to pay between $9,500 and $11,000 for seven nights at a 5-bedroom residence. Looking to bring the whole gang down for the tournament? Ten-bedrooms will set you back as much as $25,000 for a week.

Needless to say, Augusta homeowners are sitting pretty.

Without the Masters Exemption, a homeowner with $25,000 in rental income incurs a potential tax bill of $9,250 at a tax rate of 37 percent.

What would you rather have? $25,000 or $15,750?

The Masters Exemption isn’t limited to Augusta. Taxpayers across the country – Myrtle Beach, San Diego, even Killington, Vermont – can take advantage of this profitable enterprise.

Readers cannot overlook how the tax-break by-and-large favors those already with enough money to afford a home near a world-renowned golf course, a white-sand beach, or a ski mountain.

The Masters Exemption is only one of many tax circumstances with preferential treatment, which is probably why the tax code is a whopping 70,000 pages long.

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