DEDUCTIONS
The Augusta Rule: Rent Your Home to Your Business Tax-Free
7 min read
IRC Section 280A(g) lets you rent your home to your business for up to 14 days per year without reporting a dollar of income.
What the Augusta Rule is
Section 280A(g) of the Internal Revenue Code contains a provision that most business owners have never heard of. If you rent your personal residence to your business for 14 or fewer days per year, the rental income is excluded from your gross income entirely. You pay no federal income tax on it.
The name comes from Augusta, Georgia, where homeowners historically rented their homes during the Masters golf tournament for significant sums without reporting the income. The provision has since become a legitimate planning tool for business owners who can justify using their home for genuine business meetings, retreats, or training events.
The 14-day limit
The 14-day cap is strict. Rent your home for business purposes for 15 or more days in a tax year and the exclusion disappears entirely. The days count as rental days, not hours. A two-hour strategy session at your home counts as one rental day.
These must be separate days of genuine business use. A two-week family vacation does not count. The use must be for your business, not personal purposes.
What qualifies as a legitimate business purpose
The IRS has not published an exhaustive list of approved business purposes, but the standard is that the use must be for a genuine business reason, not a device to convert personal expenses into deductions. Uses that typically qualify:
- Annual board or advisory board meetings
- Business planning retreats with partners or key employees
- Team training or onboarding sessions
- Client or prospect events with a clear business agenda
- Production or recording work performed at the property for the business
Social gatherings dressed up with a business agenda do not qualify. The business purpose must be genuine, and if you are audited, you need documentation to demonstrate it.
Setting the rental rate
The rental rate must reflect fair market value. You cannot pay yourself $10,000 per day if comparable event space in your area rents for $500. The IRS expects you to charge what the market would actually support for similar space.
Documenting fair market value means obtaining actual comparable quotes from hotels, conference centers, or event venues in your area for similar capacity and dates. Keep those quotes in your records.
Example: Annual Planning Retreat at Home
A business owner holds a two-day annual planning retreat at their home, using the living and dining rooms for the sessions. Comparable hotel meeting space in their market rents for $1,500 per day for a group of the same size.
Rental income: $1,500 x 2 days = $3,000. Federal income tax on this income under Section 280A(g): $0.
The business deducts the $3,000 as an ordinary and necessary business expense. At a 32% combined federal and state marginal rate, the business saves approximately $960 in tax.
Scaled to the full 14-day limit at $1,500 per day: $21,000 in tax-free rental income, with the full $21,000 deductible by the business. The net tax benefit of the full 14 days at this rate and bracket is roughly $6,720.
Documentation requirements
This strategy lives and dies on documentation. The IRS can disallow the deduction on audit if you cannot prove the rental was genuine and for a legitimate business purpose.
- A written rental agreement between you personally and your business
- Invoices from you to your business for each rental period
- Proof of payment: a check or ACH transfer from the business account to your personal account
- Meeting agendas for each business use day
- Attendance records or sign-in sheets if others were present
- Comparable rental quotes from hotels or event spaces to support your rate
Common mistakes
- Not documenting fair market rate. Charging above-market rent shifts the excess back to taxable compensation. Get quotes and keep them on file.
- Exceeding 14 days. The 15th day eliminates the exclusion entirely for that year. Fourteen is the hard ceiling.
- Not actually transferring the rent payment. The business must make a real payment to your personal account. A memo entry on your books is not enough.
- Mixing personal use on the same days. If you use the home for personal purposes on the same days as the business rental, the characterization of the days is muddied.
- Conflicting with a home office deduction. If you're already claiming a home office on the same space, discuss with your CPA how the two interact before implementing both.
When this strategy works best
The Augusta Rule is most effective for business owners who can legitimately host business events at a home that commands meaningful rental value, and who operate through an S-corp or C-corp where the separation between personal and business finances is clear. It is also a natural fit for business owners who already host team events, client dinners, or board meetings and simply have not structured them to qualify.
Key takeaways
- The exclusion is capped at 14 days per year. The 15th day removes the benefit entirely.
- The business must actually transfer the rental payment to your personal account. Documentation is everything.
- Fair market rate, not an inflated number, must be used. Obtain comparable quotes and keep them on file.
- The strategy works cleanest for S-corp or C-corp owners where the separation between personal and business finances is clear.
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Get your personalized analysisThis article is for educational purposes only and does not constitute tax, legal, or financial advice. Consult a licensed CPA, tax attorney, or enrolled agent before implementing any strategy. Tax laws change and your specific circumstances matter.