The Augusta Rule — Rent Your Home to Your Business Tax-Free
What Is It?
Section 280A(g) of the Internal Revenue Code — commonly called the “Augusta Rule” because it was created to help Augusta, Georgia homeowners rent their homes during the Masters golf tournament — allows any homeowner to rent out their home for up to 14 days per year without reporting any of the rental income on their tax return. The income is completely tax-free, with no limit on the amount charged.
Small business owners have discovered that they can use this rule to rent their own home to their own business for legitimate business meetings, planning sessions, retreats, or events — and the business gets a tax deduction for the rental expense while the homeowner pays zero tax on the income received.
How It Works
- Your business needs a legitimate reason to rent the space. This could be board meetings, strategic planning sessions, team retreats, client events, holiday parties, or training days. The use must be genuinely for business purposes.
- Charge a fair market rental rate. Research what comparable spaces (conference rooms, event venues, Airbnb rentals) charge in your area for similar-sized spaces. The rate must be reasonable and defensible — not inflated.
- Limit to 14 days or fewer per year. If you exceed 14 days, the entire arrangement falls apart — all rental income becomes taxable and subject to the regular rental income rules.
- Document everything. Keep written records of:
- A formal rental agreement between you (homeowner) and the business
- Meeting minutes, agendas, or event descriptions for each rental day
- Comparable rental rate research to justify your pricing
- Payment records (the business should issue an actual payment, ideally by check or transfer)
- The business deducts the rental payment. The payment is a deductible business expense (rent) on the business’s tax return.
- You do not report the income. Under IRC § 280A(g), rental income from 14 or fewer days is excluded from your gross income entirely. You don’t even need to file a Schedule E for it.
What Most People Don’t Know
- There is no cap on the rental rate (but it must be “fair market value”). If comparable venues in your area charge $1,000/day, you can charge that. The key is documentation and reasonableness.
- It works for any business entity type. S-corps, C-corps, LLCs, sole proprietorships, and partnerships can all use this strategy, though the IRS may scrutinize sole proprietors more closely (since the payer and payee are the same person — an S-corp or LLC provides more separation).
- It’s been used for decades. This isn’t a new or aggressive strategy — § 280A(g) has been in the tax code since 1976.
- The IRS has been increasing scrutiny. While fully legal, the Augusta Rule has attracted more attention in recent years. Sloppy implementation (no documentation, inflated rates, no actual business meetings) is a red flag. Proper documentation is essential.
- It cannot be combined with the home office deduction for the same space. If you already deduct a home office, you should use a different area of the home for the rental events, or be very careful about overlapping claims.
Who Benefits Most?
Small business owners who hold meetings, planning sessions, or events at their home. Owners of S-corps and LLCs get the cleanest tax treatment. The savings are most significant for business owners in higher tax brackets and those in areas with high rental rates.
Legal Basis
- IRC § 280A(g) — “Special rule for certain rental use”: A dwelling unit used by the taxpayer as a residence during the taxable year shall not be treated as rental property if it is rented for fewer than 15 days during the year. No deduction for rental expenses is allowed, but the rental income is excluded from gross income.
- IRC § 162(a) — Allows businesses to deduct ordinary and necessary business expenses, including rent paid for business use of property.
- Prop. Reg. § 1.280A-1(e) — Proposed regulations interpreting the 14-day exclusion rule.