The Augusta Rule: Rent Your Home to Your Business

The Augusta Rule lets you rent your home to your own business for up to 14 days a year, deduct the rent on the business return, and pay no tax on the money you receive. It comes from Internal Revenue Code Section 280A(g), and the mechanics are real. The catch is that it only works if your business is a separate taxpayer from you, and only if the rent is at market rate and the meetings are documented. Get either wrong and the deduction disappears in an audit. This guide covers who qualifies, how the numbers work, and the records that make it hold.

What the Augusta Rule actually says

The rule gets its nickname from Augusta, Georgia, where homeowners near the golf course rent their houses to Masters attendees for a week each spring and pocket the income tax-free. The mechanism is Section 280A(g): if a dwelling unit you use as a residence "is actually rented for less than 15 days during the taxable year," then no deductions are allowed for that rental use, and "the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer."

Two things follow from that single sentence. First, "less than 15 days" means 14 days or fewer, counted across the whole year. The days do not have to be consecutive. Second, the income is invisible to your personal return. The IRS states it plainly in Topic 415: if you use a dwelling unit as a residence and rent it for fewer than 15 days, "don't report any of the rental income and don't deduct any expenses as rental expenses." Publication 527 carries the same rule.

That is the vacation-rental version. The business version adds a second party: your own company rents your home for a legitimate business purpose, pays you a market rent, and deducts that rent as an ordinary business expense under Section 162. You exclude the payment under 280A(g). The same dollars are deducted by the business and excluded from your income.

Who can use the Augusta Rule (and who can't)

Here is the part the "free money" posts skip. The strategy needs two separate taxpayers: the business that pays the rent and deducts it, and you as the individual landlord who excludes the income. A sole proprietor does not have two taxpayers. You and your Schedule C business are the same person, so there is no separate party to rent from or pay. The same is true of a single-member LLC that has not elected corporate treatment: the IRS disregards it and sees one individual.

So the Augusta Rule works when your business is legally distinct from you and files (or passes through) its own return:

If you run a Schedule C business and want this deduction, the prerequisite is an entity change, which has its own costs and payroll obligations. That decision is bigger than one deduction, so weigh it the way you would weigh any sole proprietor versus LLC or S-corp election, not as a tax trick on its own.

How the numbers work: a worked example

Say you own an S corporation and hold your quarterly strategy sessions and an annual planning retreat at your house, 14 days across the year. You get three written quotes from comparable meeting venues in your area (a hotel conference room, a coworking day-rate, a private event space) and they average about $1,500 a day for a room of similar size. You set the rent at $1,500 a day and sign a rental agreement between you and the S corp.

• Days rented: 14 (inside the "fewer than 15 days" limit)
• Daily rent: $1,500 (supported by three comparable quotes)
• Total rent: 14 × $1,500 = $21,000

The S corporation deducts $21,000 as a business expense. You receive $21,000 and, because the home was rented fewer than 15 days, report $0 of it on your personal return. That $21,000 of business profit, which would otherwise have flowed through to your 1040 and been taxed at your marginal rate, is now gone from your taxable income. At a 24% federal marginal rate that is roughly $5,040 less in federal income tax. Your actual savings depend on your bracket, your state, and your entity.

Notice what does the work here: the day count stays under 15, and the daily rate is one you can defend with outside evidence. Push either lever too hard and the whole thing collapses, which is exactly what happened in the case every tax adviser now cites.

What "fair market rent" means, and the Sinopoli warning

The rent your business pays has to be ordinary, necessary, and reasonable. "Reasonable" means what an unrelated party would charge for the same space. The Tax Court showed what happens when it is not in Sinopoli v. Commissioner (T.C. Memo 2023-105).

Three owners of an S corporation rented portions of their own homes to the company for monthly meetings. The company paid each of them $3,000 a month and, over less than three years, deducted $290,900 in rent. The IRS challenged it, and the court agreed that $500 per meeting was a reasonable figure, calling even that "generous." Worse for the taxpayers, they could produce written proof for only 12 meetings in one year and 9 in another, with nothing for the first year. The court found that the owners had not presented written documentation such as minutes, agendas, or calendars to show the meetings happened, and that their testimony about the business purpose was "vague and unconvincing." Nearly the entire deduction was thrown out.

The lesson is not that the Augusta Rule failed. It is that inflated rent and missing records failed. The owners paid six times a defensible rate and kept almost no proof that the meetings happened. Both mistakes are avoidable, and both are the difference between a deduction that survives and one that becomes back taxes plus penalties.

The records that make the Augusta Rule hold up

The deduction lives on substantiation. Before you claim it, build the file a reviewer would ask for:

1. Comparable rate evidence. Two or three quotes or listings for similar meeting space near you, saved with the date you gathered them. This is what turns your daily rate from a guess into a market figure.
2. A written rental agreement between you and the business, naming the dates, the space, the daily rate, and the business purpose.
3. A genuine business reason for each day. Board meetings, strategy sessions, planning retreats, or client events, with an agenda and minutes for each one. A meeting with a single shareholder still needs a real agenda and a record of what was decided.
4. Proof the rent was actually paid from the business account to you, not just booked on paper.
5. A count you can prove stays under 15 days. If you also claim a home office deduction, keep the two separate; the home office covers regular business use of a specific area, and the Augusta days are distinct rental days.

One wrinkle catches people at year-end. A business that pays $600 or more in rent to an individual generally has to issue a Form 1099-MISC, so your own company may report the rent to the IRS even though the income is excludable. If you receive one, do not ignore it. The IRS matches 1099s to returns, and an unreported amount triggers a notice. Have your preparer report it and back it out with reference to Section 280A(g) so the numbers reconcile. If you are already tracking the business's contractor and rent payments for 1099 season, fold this one into the same list.

How SparkReceipt keeps the paper trail

The Augusta Rule is won or lost on documentation, and that is ordinary expense-and-record work. From the business's side, the rent is a deductible expense that needs an invoice, a payment record, and the supporting agreement stored where you can find it a year later. SparkReceipt captures that rent invoice like any other document, keeps it categorized in your business expense tracker, and files it alongside the comparable-venue quotes and the meeting records so the whole packet lives in one place.

When the year closes, the receipt tracker built for tax time and one-click expense reports turn that folder into something your accountant, or an examiner, can read without a scavenger hunt. The rule does the tax work; clean records are what let it survive a second look. You can see the plans and start organizing before the next quarterly meeting. Get Started.

Frequently asked questions

Can a sole proprietor use the Augusta Rule? No. A sole proprietor and a disregarded single-member LLC are the same taxpayer as the business, so there is no separate party to pay or exclude the rent. The rule needs an S corporation, partnership, multi-member LLC, or C corporation.

How many days can I rent my home under the Augusta Rule? Up to 14. Section 280A(g) applies when the home is rented "less than 15 days" in the year. Rent it 15 days or more and the exclusion is gone and the income becomes taxable.

Do I have to report the rental income? If the home is rented fewer than 15 days, no. IRS Topic 415 says not to report the income or deduct rental expenses. If your business issues a 1099-MISC for the rent, report and reconcile it so IRS matching does not flag your return.

What rent can I charge my business? A rate an unrelated party would pay for comparable space, supported by outside quotes. In Sinopoli v. Commissioner, the Tax Court cut a $3,000-a-meeting rate to $500 and disallowed the rest, so document the market rate before you set it.

Does the meeting have to have a real business purpose? Yes. The rent has to be an ordinary and necessary business expense. Keep an agenda and minutes for each day; the Tax Court disallowed deductions where the business purpose was "vague and unconvincing."

Key takeaways

• The Augusta Rule (Section 280A(g)) excludes up to 14 days of home rental income a year, while the business deducts the rent, when a home you use as a residence is rented fewer than 15 days.
• It needs a separate taxpayer. A sole proprietor or disregarded single-member LLC cannot rent to itself; the rule works for S corps, partnerships, multi-member LLCs, and C corps.
• Fair market rent is the ceiling. Set the daily rate with outside comparables. In Sinopoli the Tax Court reduced an inflated rate to $500 a meeting and threw out $290,900 in deductions.
• Documentation decides the outcome. A written agreement, an agenda and minutes for each day, comparable-rate evidence, and proof of payment are what keep the deduction on audit.
• Reconcile any 1099-MISC. Your business may have to issue one for the rent; report and offset it rather than leaving it unmatched.