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The Augusta Rule, codified in Internal Revenue Code Section 280A(g), lets a homeowner rent their personal residence for up to 14 days per calendar year without reporting a dollar of the rental income on their personal tax return. For an S-corp or LLC owner who can legitimately host business meetings, planning retreats, or client dinners at home, that means $7,000 to $21,000 of fully untaxed income per year — deducted by the business on the same transaction — with no offsetting personal liability.
Key takeaways
- IRC 280A(g) allows up to 14 days of personal residence rental per year tax-free at the personal level.
- Day 15 ruins the entire year — all rental days become reportable income, not just the 15th day.
- The business deducts the rent as an ordinary expense; the owner reports nothing.
- Rent must be fair market rate, documented with Airbnb, Peerspace, or hotel meeting-room comparables.
- Required paperwork: board meeting minutes, written rental agreement, invoice, and a clean bank transfer trail.
The mechanics of the Augusta Rule
Section 280A is the part of the tax code that governs personal use of a dwelling unit. Subsection (g) carves out a specific exception: if you rent the dwelling for fewer than 15 days during the year, you do not have to report the rental income at all, and you also cannot deduct rental expenses against it.
For a homeowner running an S-corp or LLC, the structure looks like this. The business pays the owner rent for legitimate business use of the home — typically a meeting, planning session, training, or client event. The business deducts the rent as a Section 162 ordinary and necessary business expense, which reduces business taxable income. The owner receives the cash. Because the year stays under 15 rental days, the owner reports zero on the personal return.
The dollar example
14 days at $500 per day equals $7,000 of personal income with $0 tax owed at the personal level, plus a $7,000 business deduction. At a 32 percent federal plus 9 percent state combined bracket, the business deduction is worth roughly $2,870 in reduced taxes. Combined value: about $9,870 of cash and tax savings for compliance work that takes a few hours per year.
14 days at $1,500 per day (a defensible rate in many metro areas for a full-day private event venue) equals $21,000 of tax-free personal income plus a $21,000 business deduction — roughly $29,610 of combined value in a high-bracket year.
Why this got the name "Augusta Rule"
The rule was lobbied into the tax code by Augusta, Georgia homeowners who rented their houses out for one week a year during the Masters Tournament. They wanted to keep the rental income tax-free without having to set up as commercial landlords. Congress agreed and the 14-day exception was born. The strategy now applies to any homeowner, anywhere, for any reason — as long as the days stay below 15 and the rent is at fair market value.
Who can use it
The Augusta Rule applies to any taxpayer who owns or rents a personal residence and rents it for fewer than 15 days. In practice, the high-value use is for business owners who control both sides of the transaction: the business pays, the owner receives.
Eligible entity types
- S-corporation. The most common and cleanest use case. The S-corp deducts the rent expense, the owner receives cash personally.
- C-corporation. Works similarly, with the corporation deducting the expense against C-corp taxable income.
- LLC taxed as a partnership or S-corp. Works — the LLC pays, the member receives personally.
- Sole proprietorship (Schedule C). Does not work cleanly. The sole proprietor and the homeowner are the same legal taxpayer; you cannot rent to yourself in a way that creates a deductible business expense without the offsetting personal income. Convert to an LLC or S-corp first.
Fair market rent is the rule that gets people caught
The rent paid must be ordinary and reasonable. The IRS does not publish a number — you have to establish one with comparable evidence and keep that evidence in the file.
How to document fair market rent
- Airbnb comparables. Pull three to five listings in your zip code for whole-home rentals of comparable size. Screenshot the listings with prices.
- Peerspace, Splacer, and Giggster. These platforms list private homes for hourly or daily business event rental. Use full-day rates for comparable square footage and amenities.
- Hotel meeting room and event venue quotes. Get a written quote from a comparable hotel or venue for the same number of attendees. This documents the upper bound.
- Save the comps in a dated PDF. One PDF per rental day, with the screenshots and the price calculation. File it with your business records.
If your home is a 3,000 square-foot suburban property and comparable Peerspace listings rent for $600 to $1,200 per day, a rate of $750 to $1,000 per day is defensible. A rate of $3,000 per day is not, unless your home is unique in some material way and you have the comps to prove it.
The required documentation packet
Every Augusta Rule transaction should have five documents in the file. Missing any of them is the difference between a clean deduction and an audit unwinding the entire arrangement.
1. Board minutes or written resolution
For each rental day, the corporation should produce minutes recording the date, purpose of the meeting, attendees, and a resolution authorizing the rental of the owner's home at the stated rate. For an LLC, a written manager's resolution serves the same purpose.
2. Rental agreement
A written agreement between the business (as renter) and the owner (as landlord) covering each rental day. It should specify date, hours, rate, scope of use, and acknowledge IRC 280A treatment. Form is straightforward — a one-page document works.
3. Rent invoice
The owner-as-landlord invoices the business-as-renter for the day. Date, amount, property address, payment terms, and a signed line.
4. Bank transfer trail
Pay the rent from the business bank account to the personal bank account. Never pay cash. Never net it against owner distributions. The check or ACH should reference the invoice number.
5. Comparable rent evidence
The Airbnb / Peerspace / hotel comps that establish the fair market rent for the day. Dated PDF, filed by year.
6. Meeting agenda and attendee list
For each rental day, document the business purpose. Agenda, attendee list, topics discussed. This is what proves the rental was for a legitimate business reason — not a holiday party with rent attached.
Defensible business uses
Not every "meeting" qualifies. The rental day needs a real business purpose. Examples that hold up:
| Business use | Defensibility | Typical rate range |
|---|---|---|
| Annual planning retreat (full day) | High — with agenda and attendees | $500-$1,500 |
| Quarterly board / leadership meeting | High — standard corporate practice | $400-$1,000 |
| Team training or onboarding | High — if you can show training materials | $500-$1,200 |
| Client entertainment or pitch | Medium — needs invitees and follow-up record | $500-$1,500 |
| Filming sessions or content production | Medium — needs deliverables produced | $300-$1,000 |
| Personal holiday party with one slide | Low — IRS recharacterization risk | Avoid |
IRS audit triggers
The Augusta Rule is fully legal and well-established. The IRS has audited and lost on properly documented cases (notably Sinopoli v. Commissioner, 2023, where the court allowed a portion of Augusta Rule rent but disallowed the inflated rate). Auditors look for specific red flags.
Round numbers without comps
$1,000 per day for 14 days totaling exactly $14,000, with no documented comparables, is the classic audit pattern. It looks engineered. Use actual market data and let the number land where it lands ($837.50 per day is more credible than $1,000 even).
No meeting agendas
The Sinopoli case turned partly on the lack of substantive meeting documentation. Each rental day should have a real agenda and proof the meeting actually occurred and accomplished something.
Rates above market
If your home rents on Airbnb for $300 per night and you bill the business $2,000 per day, the IRS will recharacterize the excess as a distribution — taxable to the owner, not deductible to the business. The strategy unwinds.
Hitting exactly 14 days every year
14 days is the legal maximum. Using it every year is fine. Using exactly 14 days every year with identical round-number rates looks like a packaged tax product rather than legitimate business activity. Vary the days, vary the rates with actual events.
Sole proprietor attempts
Schedule C sole proprietors have no separate entity to rent from. Attempting the strategy without an S-corp or LLC in the middle is one of the cleanest red flags an auditor sees.
State tax considerations
The federal rule under 280A(g) is uniform. State income tax conformity varies. Most states conform automatically because they start from federal taxable income. A few states have separate rules — check with a local CPA if your state does not conform fully to the Internal Revenue Code.
One specific issue: some cities and counties impose transient occupancy or hotel taxes on short-term rentals. The IRS rule does not exempt you from local taxes. If your jurisdiction taxes any rental under 30 days, you may owe local tax even though federal income tax is zero.
Common mistakes
- Renting on day 15. The cliff is absolute. Day 15 makes all 15 days taxable.
- Mixing personal Airbnb rentals with Augusta Rule days. Days you rent to outside parties count against the 14-day budget too. If you Airbnb your home for 10 days during summer, you only have 4 Augusta Rule days left that year.
- Not actually using the home for the business activity. If the "meeting" happened at a coffee shop and you backdated paperwork, that is fraud, not aggressive tax planning.
- Skipping the bank transfer. Cash payments or netted distributions destroy the substance of the transaction.
- Forgetting state and local rental taxes. Check your city's transient occupancy rules.
- Letting the rate creep above market. Recharacterization is the default IRS remedy.
Related reading
FAQ
What is the Augusta Rule?
IRC Section 280A(g) lets a homeowner rent their personal residence for fewer than 15 days per year without reporting the rental income on their personal tax return. The renter (often the homeowner's own S-corp or LLC) still deducts the rent as a business expense.
How many days can I rent my home tax-free?
Up to 14 days per calendar year. On day 15 the entire year's rental income becomes reportable on Schedule E.
Does the Augusta Rule work for sole proprietors?
No, not effectively. A Schedule C sole proprietor and the homeowner are the same taxpayer, so the structure cannot produce a deductible business expense and tax-free personal income separately. Form an S-corp or LLC first.
How do I determine fair market rent?
Pull comparable rates from Airbnb (whole-home rentals in your zip), Peerspace or Giggster (private home event rentals), and quotes from hotel meeting rooms of similar capacity. Document the comparables in a dated PDF and save it with your business records.
What business activities qualify?
Activities a normal business might rent an outside venue for: board meetings, planning retreats, training sessions, client events, content production. Each day needs an agenda, an attendee record, and evidence the activity actually happened.
Does the business need to issue a 1099 for the rent?
No. Because the rental is exempt from reporting under 280A(g), no 1099-MISC or 1099-NEC is required for the owner. The business still expenses the rent normally on the return.
Can I use the Augusta Rule on my vacation home?
Yes, as long as the home qualifies as a dwelling unit you also use personally during the year. The 14-day limit applies separately to each home you rent.
Will using the Augusta Rule trigger an audit?
The strategy itself is legal and common. Audit risk comes from execution: inflated rates, round numbers without comparables, missing meeting documentation, or paying via methods that look like disguised distributions. Properly documented, the deduction is straightforward.
Can I claim home office and Augusta Rule on the same home?
Yes, but the home office deduction covers the regular and exclusive business use of part of the home, while Augusta Rule covers occasional whole-home rental for specific events. They are different deductions for different uses. Keep the documentation separate.
What happens if I get audited?
Produce the documentation packet: minutes, agreement, invoice, comparables, bank transfer, agenda. Properly documented Augusta Rule deductions hold up. The IRS unwinds the strategy only when documentation is missing or rates are unsupported by market evidence.
Bottom line
The Augusta Rule is one of the cleanest, most settled tax strategies available to an S-corp or LLC owner who works from home. The legal structure is unambiguous, the dollar value is meaningful ($7,000 to $21,000 of tax-free personal income plus a matching business deduction every year), and the execution is mostly paperwork. The strategy fails only when the paperwork is missing, the rate is unsupportable, or the homeowner uses Schedule C instead of an actual entity. Get the structure right, document each rental day in a one-PDF packet with agenda, comps, and bank trail, and the IRS gives you 14 days of untaxed personal income for the rest of your working life.
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