A rental income tax break known as the “Masters exemption,” permits homeowners to rent their homes for less than 14 days and not report that income to the IRS. The exemption was named after residents near the Masters Golf Tournament at the Augusta National Golf Club renting their homes out during the event earning as much as $20,000.

You need to know, however, these rentals are not exempt from city or state lodging tax. Some states and cities impose occupancy taxes on short-term rentals and the host is required to collect the tax directly from renters and submit the money to the tax authority. The host is responsible for remitting the tax whether it is collected or not.

Some companies, like Airbnb, collect and submit the taxes in San Francisco, Chicago and 34 states. In other locations the owner is responsible for the occupancy tax which may be up to 15% and it may need to be filed monthly. Ideally, the occupancy tax should be shown as a line item on the bill submitted to the guest as the host is responsible for remitting the tax whether it is collected or not.

In some areas, private home rentals are exempt from occupancy tax — but owners should check with their state. Short-term in most states is less than 30 days. In Hawaii and Florida, short-term is up to six months. Penalties typically range from 10 to 25% of the tax due, plus interest and late fees.

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