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How the Masters Might Help Your Railroad Retirement Thumbnail

How the Masters Might Help Your Railroad Retirement

Video Retirement Financial Planning Taxes


Learn a way to get tax-free income in Railroad Retirement. Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors, and today, we're talking about the Masters. If you're watching the premiere of this video, today is the kickoff of the Masters. So, very excited for that. I've got my green jacket on. This was my father's old jacket. He actually won this in a golf tournament back in the day. I think Flight D Club Champion. I don't know what that means, but that's ... He was pretty excited about it and went out and bought this jacket, and God rest his soul. I have it now. So, enjoy the Masters today.

What I want to show you about today was what they call in the IRS the Augusta Rule, all right? What we're talking about is if you go back historically, I think back to Eisenhower, right? Eisenhower used to be a golfer, and throughout the day, politicians have always gone down to Augusta. They always wanted to play that golf course, and somehow, they stuck into some tax bill, the what they call the Augusta Rule. That means you can have two weeks, you can rent out your house or your vacation home for two weeks and get free rental income. You don't have to declare that for taxes. So, let's go over it a little bit here.

So, IRS Section 280A called the Augusta Rules is 14 days of tax-free income, all right? So, you can rent your house out for 14 days and whatever it gets, that money's yours. No taxes on it, right? I already talked about the history. Goes back to the Masters. Hence, the Augusta Rule. So, think about maybe you live in a college town, you want to rent your house out for graduation, or maybe there's college football in town. Any of those things that come up. Maybe there's an arts festival. You want to rent your house out. That's tax-free income, which is great.

So, let me walk through example. So, you have to find out what the fair market value of your residence is. So, you can't say, "Well, it's $2,000 a day, and I want to take $28,000 off my taxes." No, you can't do that. So, figure out the fair market value. Great way to do that is probably Airbnb, something like that along VRBO, see what places of similar size of scope are going for. It's a good way to do it. So, figured $500 a night times 14 days, you get $7,000 of income, right, that's tax-free. You don't have to pay any taxes on that.

So, here are some of the rules to think about, right? It can't be your place of business, right? You can't rent that out. It could be primary, secondary or vacation homes, any one of those. This is important. Expenses are not deductible. So, you might had to prep the place, get it ready. You can't write those expenses off, maintenance on that place similar to traditional rental income. So, you can't rent those. Those aren't deductible. Then, finally, it's cumulative and not consecutive, right? So, maybe it's seven ... Maybe one week here and one week there. It gets you up to 14 days, but I just wanted to show you this. It's kind of a neat little way if you're saying, geez, make some additional money in retirement income. You're not going to be in town anyway. You rent it out because you don't want to be in town because it's crazy, whatever it is. Here's a great way to make some tax-free income.

So, I hope you enjoyed this video. I hope you enjoy the Masters. I know I will. I'll be wearing my green jacket, and please subscribe to the YouTube channel. Click on this subscription and so you can get the latest whiteboard when it comes, and until next time, everyone. Please stay safe. Stay on track and take care. So long everybody. Bye.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.