IRC § 280A(g) — the provision commonly called the “Augusta Rule” — lets a homeowner rent their personal residence to their own business for up to 14 days per year and exclude that rental income entirely from personal taxable income, while the business deducts the rent as an ordinary expense.
When the structure is set up correctly, the net result is real: taxable income shifts from the business (where it would otherwise be distributed or recognized) to you personally — and at the personal level, it disappears entirely. The business gets the deduction. You receive cash. Neither of you pays tax on the rental amount. That’s the strategy in plain terms.
The provision has existed since 1976 — it’s a statutory rule, not a loophole. But it requires legitimate business substance and accurate documentation to hold up, and the IRS has targeted arrangements that lacked both.
Where the Name Comes From
The “Augusta Rule” gets its name from Augusta, Georgia, where homeowners near Augusta National have historically rented their homes during Masters Tournament week — short enough to stay under the 14-day threshold and exclude the income.
The analogy is useful but imperfect: those homeowners are renting to third parties at arm’s length, at market rates, for an event that creates obvious demand. When a business rents from its owner, the same principles apply — market-rate rent, real business purpose — but you have to create and document that market data yourself. That’s the work the strategy actually requires.
How the Strategy Works in Practice
The mechanics are straightforward: your business rents your personal residence for legitimate business events, pays you fair market rent, deducts it under IRC § 162, and you exclude the income under IRC § 280A(g).
The events that work are actual business meetings — board of directors meetings, annual planning sessions, shareholder meetings. The home functions as a venue for real business activity. The rental agreement names the specific dates, the purpose, and the rate.
The fair market rate is what comparable event space would rent for in your area. VRBO and Airbnb comparables from the same period are the most defensible reference. A formal appraisal works for larger amounts.
Your business deducts the rent under IRC § 162. You report it on Schedule E, then exclude it under § 280A(g) because the rental period was 14 days or fewer. The business keeps its deduction. You receive the payment tax-free.
The Requirements That Determine Whether This Holds
The 14-day ceiling is hard. Exceeding it by even one day eliminates the § 280A(g) exclusion for the entire rental income — not just the overage.
Beyond the day count, four things determine whether the strategy survives scrutiny:
- Legitimate business purpose. Each rental period must correspond to actual business activity. If the meeting minutes say ‘Q3 strategy session’ but no agenda, no attendees, and no follow-up decisions exist, the IRS has a straightforward argument that the event was pretextual.
- Fair market rate. The rent must be arm’s-length. Paying above-market rates inflates the deduction artificially and the IRS will disallow the excess. Document your comps before paying, not after.
- Proper paperwork. This means a written rental agreement between you and the business (signed before the rental date), corporate meeting minutes documenting the event, and a record of comparable rates supporting the price. The agreement doesn’t need to be elaborate — it needs to be real and contemporaneous.
- Qualifying residence. Under § 280A, the property must be a personal residence — not a commercial property or a vacation home that you rarely use. If the property doesn’t otherwise qualify as your residence under the statute, the exclusion doesn’t apply.
Who the Strategy Works Best For
The whole question here hinges on whether you have a legitimate C-corp, S-corp, or partnership entity with real business meetings — and whether those meetings could plausibly be held at your home.
Sole proprietors filing Schedule C cannot rent from themselves. The transaction requires two separate legal entities: you personally on one side, and your business entity on the other. A disregarded single-member LLC with no S-election doesn’t create a sufficient separation. The entity structure matters.
The strategy is most valuable for S-corp owners with significant pass-through income who already hold board meetings, shareholder meetings, or planning sessions — converting some of those to documented events at your home is realistic and defensible. If you’re manufacturing meetings that wouldn’t otherwise happen, the strategy becomes much harder to support.
Timing matters: the rental agreement must be executed before the event. You cannot retroactively create records for a closed tax year.
Is Your Augusta Rule Arrangement Properly Documented?
The strategy isn’t complicated — the documentation requirements are. Rental agreements, comparable market rates, genuine meeting minutes, a clear business purpose: if any of those are missing or thin, the deduction doesn’t hold. If you’re using this or planning to, a brief review can confirm whether your setup is defensible or needs to be tightened before it becomes an issue.
Review My Augusta Rule Setup → Or call: (619) 378-3138
Where the IRS Focuses Its Scrutiny
The IRS has targeted Augusta Rule arrangements that lack substance — paper meetings with no actual business conducted, inflated rental rates with no market support, and rentals of properties that don’t qualify as personal residences under the statute.
The strategy has received enough promotion in the S-corp planning space that the IRS is aware of it. That doesn’t make it illegitimate — it makes the documentation more important. A real rental agreement, documented comparable rates, genuine meeting minutes, and a plausible business purpose is a defensible arrangement. None of that, and it isn’t.
Frequently Asked Questions
Can a sole proprietor use the Augusta Rule?
No. IRC § 280A(g) requires a transaction between you personally and a separate business entity. A sole proprietor cannot rent from themselves. The strategy requires a C-corp, S-corp, or partnership legally distinct from you. A single-member LLC that has not elected S-corp status typically doesn’t create sufficient separation.
How do I determine what to charge my business for rent?
The rate needs to be comparable to what similar event spaces or homes rent for in your area on similar dates. VRBO and Airbnb listings for comparable properties are a commonly used reference. For larger amounts, a formal appraisal from a real estate professional provides stronger support. Document the comps before finalizing the rental agreement.
What documentation do I need?
At minimum: a written rental agreement signed before the rental date, naming the specific dates, purpose, and rate; corporate meeting minutes for each event; and documentation of comparable rates. It doesn’t need to be elaborate — it needs to exist and be created contemporaneously, not reconstructed after the fact.
What happens if I accidentally go over 14 days?
The § 280A(g) exclusion is lost entirely for the year — not just for the days over the limit. All the rental income becomes taxable to you personally. Keeping a precise calendar of rental dates is essential.
The Augusta Rule is one component of a broader S-corp compensation and distribution strategy. If you want to evaluate whether it makes sense for your structure, explore our business tax planning strategies or book a free 15-minute call to run through your specific situation.