What is the Augusta Rule? A Complete Guide for Homeowners

Introduction

If you're a homeowner who also runs a business, there's a little-known IRS provision that could save you thousands of dollars in taxes each year. It's called the Augusta Rule, and it allows you to rent your home to your business for up to 14 days per year—completely tax-free.

In this guide, we'll break down exactly what the Augusta Rule is, how it works, and whether it might be right for you.

What is the Augusta Rule?

The Augusta Rule, officially known as IRS Section 280A(g), is a tax provision that allows homeowners to rent out their personal residence for up to 14 days per year without having to report that rental income on their tax return.

Why is it Called the "Augusta Rule"?

The provision gets its nickname from Augusta, Georgia—home of the famous Masters Golf Tournament. Homeowners in Augusta would rent their homes to golf fans during the tournament week, and this rule allowed them to pocket that income tax-free.

The Key Provisions

  1. 14-Day Limit: You can rent your home for up to 14 days per year
  2. Tax-Free Income: The rental income is not reported on your tax return
  3. Fair Market Rent: You must charge a fair market rental rate
  4. Legitimate Business Purpose: The rental must serve a genuine business need

How Does the Augusta Rule Work for Business Owners?

While the rule was originally designed for homeowners renting to tourists, savvy business owners have discovered it can be used to rent their personal homes to their own businesses.

Here's How It Works:

  1. Your business needs meeting space for board meetings, planning sessions, retreats, or client events
  2. You rent your home to your business at fair market rates
  3. Your business deducts the rental expense as a legitimate business cost
  4. You receive the rental income tax-free (up to 14 days)

Example Scenario

Let's say you own an S-Corp and hold monthly board meetings. Instead of renting a conference room, you host these meetings at your home:

  • Fair market rental rate: $500/day
  • Number of meeting days: 12 days/year
  • Total rental income: $6,000

Result: Your business deducts $6,000 as a meeting expense, and you receive $6,000 in tax-free personal income.

Who Can Benefit from the Augusta Rule?

The Augusta Rule can benefit various types of business owners:

Ideal Candidates

  • S-Corporation owners who need to hold shareholder or board meetings
  • LLC members conducting planning sessions or partner meetings
  • Small business owners hosting team retreats or training sessions
  • Consultants and coaches running workshops or client events
  • Real estate investors holding investor meetings

Requirements

To use the Augusta Rule effectively, you should:

  • Own or have significant involvement in a business
  • Have legitimate business reasons for using your home as a meeting space
  • Be willing to document everything properly

What You Need to Document

Proper documentation is crucial for the Augusta Rule to hold up under IRS scrutiny:

Essential Documentation

  1. Meeting agendas showing business purpose
  2. Rental agreement between you and your business
  3. Fair market value analysis (comparable rental rates in your area)
  4. Payment records showing the business paid rent
  5. Attendee lists for meetings held at your home

Fair Market Value

You must charge a "fair market rental rate"—what someone would reasonably pay to rent a similar space in your area. Consider:

  • Hotel conference room rates
  • Event venue rental prices
  • Comparable home rental rates (Airbnb, VRBO)

Common Mistakes to Avoid

1. Exceeding the 14-Day Limit

If you rent your home for more than 14 days, ALL rental income becomes taxable and you must report it on Schedule E.

2. Charging Unreasonable Rates

The IRS can challenge rates that seem inflated. Get documentation of comparable rates in your area.

3. Lack of Business Purpose

Renting your home for a "meeting" that's really just a family dinner won't hold up. There must be legitimate business activities.

4. Poor Documentation

Without proper records, you have no defense if the IRS questions the arrangement.

5. Not Actually Transferring Funds

The business must actually pay you. Paper transactions without real payment are a red flag.

Is the Augusta Rule Right for You?

Consider the Augusta Rule if:

  • You a business
  • You have legitimate needs for meeting space
  • You're willing to maintain proper documentation
  • You want to maximize tax-efficient income

The Augusta Rule may not be right if:

  • You don't have genuine business meeting needs
  • You're uncomfortable with detailed record-keeping
  • Your business doesn't have the cash flow to pay rent
  • You're looking for aggressive tax avoidance (this should be reasonable)

How Augusta Planner Can Help

Implementing the Augusta Rule correctly requires:

  • Understanding fair market rental rates
  • Creating proper rental agreements
  • Maintaining compliant documentation
  • Working with tax professionals who understand the rule

Augusta Planner simplifies this entire process. We help you:

  1. Determine your eligibility with our free assessment tool
  2. Calculate fair market rental rates for your area
  3. Generate compliant documentation for every rental event
  4. Connect with tax professionals who specialize in the Augusta Rule

Check Your Eligibility →

Frequently Asked Questions

Does my business have to be a corporation?

The Augusta Rule works with S-Corps, C-Corps, partnerships, and multi-member LLCs. However, it does not work for sole proprietorships or single-member LLCs taxed as disregarded entities (Schedule C filers). The business must be a separate tax entity from you personally.

Can I rent my home to multiple businesses?

Yes, as long as the total doesn't exceed 14 days across all rentals.

What if I work from home regularly?

Regular home office use is different from occasional rental for meetings. You can potentially claim both, but they serve different purposes.

Do I need to report this rental income anywhere?

No—that's the beauty of the Augusta Rule. Income from rentals of 14 days or fewer is not reported on your tax return.

Next Steps

Ready to see if the Augusta Rule can work for you?

  1. Check your eligibility with our free assessment
  2. Review the requirements with your tax professional
  3. Start documenting your business meeting needs

Disclaimer: This article is for informational purposes only and does not constitute tax advice. Consult with a qualified tax professional before implementing any tax strategy.

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