The Augusta Rule lets you rent your personal home to your own business for up to 14 days a year. The business deducts the rent as an ordinary expense, and you leave the rent off your personal return. It works only when the rent is a fair market amount, the business use is real, and the paper trail proves both. This guide covers how it works, how it fits an S corporation, what to document, and where owners get into trouble.
TL;DR
- Section 280A(g) excludes rent from your income when you rent your home for fewer than 15 days in a tax year, and you cannot deduct rental expenses for those days.
- Your business needs a separate tax identity, such as an S corporation, C corporation or partnership, and must be able to deduct the rent as an ordinary and necessary expense.
- The rent has to match what comparable venues charge, and each rental day needs a written agreement, a business purpose and records of what happened.
- The Tax Court has cut deductions sharply where rates were unsupported and records were thin.
- A 15th rental day costs you the exclusion, so cap the schedule at 14 days with room to spare.
Table of Contents
- What the Augusta Rule actually says
- Who can use it
- How to rent your home to your business, step by step
- A worked example
- Fair market rent: the number that decides everything
- Documentation that holds up
- What makes an Augusta Rule arrangement fail
- Reporting: the 1099 question
- Using it with an S corporation or several businesses
- Our perspective
- Getting this set up with us
- FAQ
- Sources
What the Augusta Rule actually says
The name comes from the Masters golf tournament, where homeowners in Augusta, Georgia, rent their houses to visitors for a week. The law behind it is Internal Revenue Code Section 280A. If you use a dwelling unit as a residence and rent it for fewer than 15 days during the year, you exclude the rental income from gross income. The trade-off is that you cannot deduct expenses because of that rental use.
The IRS explains the same point in plain terms: when you use a home as a residence and rent it for fewer than 15 days, you do not report the income and you do not deduct rental expenses. The personal portions of mortgage interest and property taxes may still be deductible on Schedule A, as they would be if you never rented the home at all.
The rule says nothing about who the renter is. That is why business owners use it. Your company can be the tenant, and the company's side of the transaction follows a different set of rules, covered below.
Who can use it
Two tests apply, one to the home and one to the business.
The home must be a residence
Under Section 280A, a home counts as your residence when you use it personally for more days than the greater of 14 days or 10% of the days it is rented at a fair rental price. For a home you live in all year, that is easily met. Personal use can also include days when family members or others use the property below fair rental value, so a vacation home you rent out heavily needs a closer look.
If you rent a house or apartment rather than own it, check your lease before going further. A tenant would be subletting space, and most leases restrict that. The tax rule does not require ownership, but your landlord's permission is a practical gate.
The business must be a separate taxpayer
The arrangement needs two parties. An S corporation, C corporation or partnership is a separate entity that pays you rent. A sole proprietorship, or a single-member LLC that has not elected corporate treatment, is you. Paying rent to yourself produces no deduction, so the strategy does not apply there.
That is one reason owners reconsider their entity once profits climb. If you are weighing an S corporation, our S-Corp Tax Strategy Accelerator is a $997 one-time engagement built around that decision and the planning that follows it.
How to rent your home to your business, step by step
Most owners who use this strategy successfully follow the same sequence.
- Decide the business purpose first. Examples are a quarterly strategy meeting, a board or shareholder meeting, a planning retreat, a team training day, or a client event. The use has to be something the company would otherwise pay for elsewhere.
- Price the rental. Get written quotes from comparable local venues for the same kind of space and the same hours.
- Sign a rental agreement before the event. It should name the company as tenant, the owner as landlord, the dates, the space, the purpose and the daily rate.
- Hold the meeting and record it. Keep the agenda, attendee list and notes.
- Pay the rent from the company account to you. Pay it by check or transfer, not in cash, and in an amount that matches the agreement.
- Track the day count. Count every day you rent the home to anyone, not just to your company.
- Handle the reporting. The company deducts the rent. You exclude it under Section 280A(g). Talk to your preparer about information returns, covered below.
A worked example
The numbers below are a hypothetical to show the mechanics, not a promise of savings.
Suppose an S corporation owner holds four quarterly planning sessions at home, each a full day. Local venues with comparable meeting rooms quote $400 a day in writing. The company pays $400 a day, so $1,600 for the year.
| Item | Company | You personally |
|---|---|---|
| Rent paid | $1,600 paid out | $1,600 received |
| Treatment | Deducted as a business expense | Excluded under Section 280A(g) |
| Effect on taxable income | Lower by $1,600 | No change |
If the company's income passes through at a combined federal and state rate of, say, 35%, the deduction is worth about $560. That is a real but modest result, and it comes from four documented days.
The larger numbers you see online come from high daily rates. That is where the risk concentrates, because the deduction is only as strong as the rate you can defend.
Fair market rent: the number that decides everything
The exclusion on your side does not depend on the rate. The deduction on the company's side does. The business can deduct only an ordinary and necessary expense, and a related-party payment above market value does not qualify for the excess.
Publication 587 defines fair market value as the price between an unforced, informed buyer and seller, and notes that sales of similar property around the relevant date can help establish it. For a meeting day, the practical equivalent is what a willing venue would charge for a similar room, for the same time, in your area.
Good support looks like this:
- Written quotes or published rate sheets from at least two or three comparable local venues, such as conference rooms, hotel meeting rooms or coworking spaces.
- A match on size, setting and hours. A home office for six people is not priced like a ballroom for 500.
- Dated copies stored with the agreement.
To see what goes wrong, read about Sinopoli v. Commissioner. According to a law firm's analysis of the case, an S corporation paid shareholders nearly $291,000 in under three years to use portions of their homes for monthly meetings. Most of the deduction was disallowed because the payments lacked substantiation and were unreasonable against local market rates. The same analysis notes that even with the Section 280A(g) exclusion in place, the company's deduction still has to satisfy the ordinary-and-necessary standard, applied with extra scrutiny between related parties.
Documentation that holds up
There is no IRS form for the Augusta Rule, so your file is the whole case. Keep these items for each rental day, for as long as the tax year stays open to examination.
- Rental agreement. Signed and dated before the event, with the parties, address, dates, hours, rate and purpose.
- Rate support. The venue quotes or rate sheets behind your daily rent.
- Business purpose record. An agenda, a list of attendees and their roles, and meeting minutes or a summary of decisions made.
- Proof of payment. The company's check or transfer to you, matching the agreement.
- Calendar of rental days. One running log of every day the home was rented, to confirm you stayed under 15.
- Photos or a short note on the space used. This helps show the home was set up for the meeting.
The weak version of this file is the one you build after a notice arrives. Agreements signed after the fact, vague purposes and rent that never moved from the owner's own estimate are the patterns that lose.
What makes an Augusta Rule arrangement fail
Going past 14 days
The statute says fewer than 15 days. Renting on day 15 pushes the arrangement outside Section 280A(g), and the rental income becomes reportable with a different set of expense rules. Count personal rentals too, such as a short-term rental of the same home on a booking platform.
Meetings that are really family events
A holiday dinner with a spreadsheet on the table is not a business meeting. If your spouse and children are the only attendees, the deduction looks like a personal expense in disguise. Include real participants and real business content.
Treating records as the whole answer
The IRS has a published position on schemes that dress up personal costs as business costs. Revenue Ruling 2004-32 makes the point that careful bookkeeping cannot turn a personal expense into a business one. The rent must serve a real business purpose.
Calling something rent that is not rent
An IRS legal advice memo concluded that prize or award income cannot be classified as rent, and so cannot qualify for the Section 280A(g) exclusion. The payment has to be a genuine payment for the use of space.
Confusing it with a home office deduction
The Augusta Rule and the home office deduction are different tools. To deduct business use of your home as an expense, you generally need to use part of it exclusively and regularly for business. The Augusta Rule works because the use is occasional and the rental is for a few days. Claiming both on the same space invites questions, so talk to your preparer before doing so.
Reporting: the 1099 question
When a business pays rent in the course of its trade or business, it may have to report it. The instructions for Forms 1099-MISC and 1099-NEC say payers report rents of $2,000 or more, subject to exceptions, and the reporting threshold rose to $2,000 for tax years beginning after 2025. Many owners using the Augusta Rule pay less than that in a year. If your total is at or above the threshold, ask your preparer how to handle the form and how your return should reflect the excluded rent, so the two sides match.
Using it with an S corporation or several businesses
If you own one S corporation, the setup is simple: the company is the tenant, you are the landlord, and the company deducts the rent. For S corporation owners, the rent paid also sits alongside a reasonable salary, distributions and payroll tax planning. It does not replace them.
If you own several entities, two points matter.
- The 14 days are yours, not each company's. The limit is counted for the home, not per tenant. If two companies each rent for ten days, you are at 20 days and outside the rule.
- Each company needs its own purpose and agreement. Do not rotate one meeting through three entities to spread the deduction.
If you also rent the home on a short-term basis, our guide to the 14-day tax rule for short-term rentals shows how those days count toward the same limit. For a broader look at the strategy, see our overview of the Augusta Rule. If you own property that your business also uses, self-rental rules and trapped losses are a separate issue to understand.
Our perspective
We see the Augusta Rule as a good small tool, not a headline strategy. At a few documented days a year, it is a sensible way for an owner to be paid fairly for space the company genuinely uses. We are cautious when someone presents it as a way to move large sums out of a company, because the weight of the deduction rests on a rate that must be defended against what a stranger would pay.
Our clients are usually owners netting $300,000 to $1,000,000 a year, often with more than one entity, and the Augusta Rule is rarely the biggest line in their plan. Entity structure, accountable plans, reasonable compensation and real estate depreciation tend to move more money. The rental sits best as one piece of a year-round plan, written down in advance, with the same discipline you would apply to any related-party transaction.
Our advice is simple. Pick real business events, price them with quotes, sign before you meet, and stop at 14 days with room to spare. If a plan only works at a rate you could not show a skeptical examiner, it is not a plan.
— Melissa
Getting this set up with us
If you want the Augusta Rule built into a wider plan, our Quarterly Tax Strategy Sessions are $9,497 per year and our Monthly Tax Advisory is $11,997 per year. Both include year-round support rather than a once-a-year conversation. If you are not yet an S corporation owner, start with the S-Corp Tax Strategy Accelerator. For return preparation pricing, see our fee schedule.
FAQ
Can I use the Augusta Rule if I am a sole proprietor?
Generally not. The strategy needs a separate taxpayer to pay you rent, and a sole proprietorship is not separate from you. An S corporation, C corporation or partnership can be the tenant. Ask your preparer how your entity is taxed before you plan anything.
Is the 14-day limit per business or per home?
It is per home. Section 280A(g) looks at whether the dwelling was rented for fewer than 15 days in the tax year, so days rented to your company, another company or a short-term guest all count together.
Do I have to report the rent I receive?
If you meet the rule, you exclude the rental income from your gross income and do not deduct rental expenses. The company may still have to issue a Form 1099-MISC if it pays rent at or above the reporting threshold, which is $2,000 for tax years beginning after 2025. Confirm the reporting with your preparer.
Does the Augusta Rule make the rent tax-free for the business too?
No. The exclusion helps you as the homeowner. The company gets a deduction only if the rent is an ordinary and necessary business expense, supported by a fair market rate and a genuine business purpose.
Sources
- 26 U.S.C. § 280A, Disallowance of certain expenses in connection with business use of home
- IRS Topic no. 415, Renting residential and vacation property
- IRS Publication 587, Business Use of Your Home
- Instructions for Forms 1099-MISC and 1099-NEC
- Revenue Ruling 2004-32
- IRS legal advice memorandum INFO 2006-0012
- Understanding the Internal Revenue Code's Augusta Rule, Adams and Reese