What is the Augusta rule and can my business rent my home?
The Augusta rule refers to a Code provision excluding rental income from a home rented for fourteen days or fewer in a year. A business owner can rent their residence to their own business for genuine meetings at a fair-market rate, deducting the rent and excluding the income personally. It holds up only with a written agreement, comparable venue quotes, agendas and minutes, and a real purpose for each day.
Key points
- The Augusta rule is section 280A(g), which excludes rental income from a personal residence rented for fourteen days or fewer in a tax year.
- A business owner can rent their home to their own business for genuine meetings, deducting the rent at the business and excluding it from personal income.
- The rent must match what a comparable hotel, conference room, or event space would charge, supported by written quotes kept with the records.
- Each rental day needs a written rental agreement, an agenda, minutes showing who attended, and actual payment from the business to the owner.
- Exceeding fourteen rental days in a year loses the exclusion, and days with no real business activity are disallowed on examination.
What is the Augusta rule?
The Augusta rule is the nickname for section 280A(g) of the Internal Revenue Code. It provides that when a dwelling unit used as a residence is rented for fewer than fifteen days during the tax year, the rental income is excluded from gross income and no rental expenses are deducted. In plain terms, a homeowner can rent out a personal residence for up to fourteen days a year and report none of the rent.
The rule takes its name from Augusta, Georgia, where residents rent their homes to visitors during a famous golf tournament each spring. Congress wrote the exclusion for short, incidental rentals of a home, and it applies to any residence, not only homes near a sporting event.
How can a business owner use the Augusta rule?
If your business is a separate entity from you, such as an S-corporation, a partnership, or a C-corporation, that business can rent your residence for genuine business events and pay you rent. The business deducts the rent as an ordinary and necessary expense under section 162, and because the rental period stays within the fourteen-day limit, you exclude that rent from your personal income under section 280A(g). The same dollars leave the business as a deduction and arrive to you excluded from income.
The events must be real: strategy sessions, board or partner meetings, planning retreats, or team gatherings that have an actual purpose and actually take place at the home. The rent must be a fair-market rate, meaning what a comparable venue would charge to host the same meeting for the same length of time. The defensible approach is to gather written quotes from hotels, conference rooms, or event spaces in your area for comparable space and use those to set the rate you charge.
What documentation does the IRS expect?
Documentation turns the strategy from a target into a sound position, because this is an area examiners understand well. For each rental day, keep a written rental agreement between you and the business, the comparable quotes that support the rate, an agenda for the meeting, minutes or notes showing that it happened and who attended, and a clear statement of the business purpose. Payment should actually move from the business bank account to your personal account on or near the rental date.
The business generally reports rent paid to an individual on Form 1099-MISC once the annual reporting threshold is met, exactly as it would for rent paid to an unrelated landlord. Treat the arrangement precisely as you would treat renting space from a third party, because that is the standard being applied.
What are the limits of the Augusta rule?
The fourteen-day cap is per year and strict. Rent the home for fifteen days or more and the exclusion is lost for the entire year, so every rental day, including any rented to someone other than your business, counts toward the limit. The rate must be reasonable for the space and the event; an inflated rent designed to move money out of the business is disallowed and can draw accuracy-related penalties under section 6662.
The strategy does not fit a sole proprietor who reports on Schedule C, because an individual cannot pay deductible rent to themselves. It also does not fit an owner with no genuine reason to meet at home. Used properly, the Augusta rule is a clean, modest benefit for owners who already hold legitimate meetings. A CPA can set a defensible rate, build the documentation routine, and confirm it fits your entity and your facts so the position can be defended if it is ever examined.
Related strategies
People also ask
- Can my business rent from an entity I own?
- Can I deduct a home office as a business owner?
- What triggers an IRS audit for a small business?
- How long do I need to keep business tax records?
Sources
Related guides: asset protection
Mena Hemaia, CPA, CIA
Chief Executive Officer, Accountack — West Palm Beach, Florida
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