The Augusta Rule: Renting Your Home to Your Business Tax-Free

The Augusta Rule (formally Section 280A(g) of the Internal Revenue Code) lets homeowners rent their home for up to 14 days per year and exclude the rental income entirely from federal taxable income. For S-corp, C-corp, and multi-member-LLC/partnership owners, this creates a legitimate strategy (sole proprietors and single-member LLCs filing Schedule C cannot use it — see "Who can use this" below): rent your home to your own business for meetings or events, get a tax deduction on the business side, and pay no income tax on the personal side. Done right, this can shift $14,000+ of pre-tax income to tax-free for high-bracket taxpayers.

The basic mechanic

Section 280A(g) says: if you rent your home for fewer than 15 days per year, the rental income is not taxable income to you, AND the related expenses are not deductible.

Combined with the deductibility of legitimate business rent (Section 162 ordinary and necessary business expense), you get:

• Business side: Deducts rent paid (e.g., $1,500/day × 14 days = $21,000 in rent expense, lowering taxable business income).
• Personal side: Receives the $21,000 but excludes it from gross income under Section 280A(g).

Net effect: $21,000 moves from business income (taxed) to personal income (untaxed) without ever appearing on a 1040 as taxable income.

The legitimate use case

You must actually have a business reason to rent your home. The IRS doesn't accept "I rented to my LLC for no purpose" as a deductible business expense. Legitimate uses:

• Annual board meetings (for S-corps, C-corps with multiple shareholders)
• Quarterly business strategy retreats
• Client entertainment events
• Team retreats / off-sites
• Photography or video shoots for marketing
• Workshops or training events

The IRS standard: "ordinary and necessary" for the business. A solo freelancer claiming 14 days of "annual planning meetings with myself" in their own home is going to lose in audit.

The fair-market-rent requirement

The rental rate must be reasonable — what comparable venues in your area charge. You can't rent your $400k suburban home to your business for $5,000/day. Fair market is what an unrelated third party would pay.

Documentation:

• Get 2-3 quotes from comparable venues (Airbnb listings, hotel meeting rooms, event spaces) in your area for similar capacity events.
• Set your rate in line with these quotes.
• Keep written records of the comparison.

Typical defensible daily rates: $500-$2,500/day for residential events, depending on home size, location, and event capacity. Higher in major cities.

The 14-day limit (strict)

You can rent at most 14 days per year. On day 15, the rule flips entirely — ALL rental income (including the previous 14 days) becomes taxable, AND you must apportion home expenses against the rental.

Strategy: track days carefully. If your business needs to use the home for the 15th time, find an alternate venue.

The documentation checklist

For each Augusta-rule rental, keep:

1. Rental agreement — written contract between you (homeowner) and your business entity, dated, signed by both parties.
2. Business purpose statement — what the meeting/event was for, agenda or itinerary.
3. Attendee list — who attended, in what business capacity.
4. Comparable rent research — quotes from 2-3 other venues showing your rate is reasonable.
5. Payment record — bank or check transfer from the business account to your personal account.
6. Day-counting log — which days were Augusta-rule days vs personal use.

Without all six, your audit defense is weak.

Sole proprietor vs S-corp

The Augusta Rule requires a separate-entity business structure. It works for S-corps, C-corps, and multi-member LLCs/partnerships. It does NOT work for sole proprietors or single-member LLCs filing Schedule C — see the highlighted bullet below:

• Sole proprietor / single-member LLC (Schedule C): The Augusta Rule does NOT work here. The "business" and "you" are the same taxpayer for federal income tax — paying yourself rent is a wash, and the IRS / Tax Court has consistently disallowed Schedule-C-to-personal Augusta deductions. To use §280A(g), you need a separate-entity structure (S-corp, C-corp, or multi-member partnership) where the business pays an unrelated taxpayer (you, personally).
• S-corp: The S-corp is a separate entity from you. The S-corp deducts the rent (lowering K-1 income), and you exclude it under 280A(g). Cleanest application.
• C-corp: Same as S-corp, with the added benefit of avoiding double taxation on the $21k that would otherwise flow through.

State tax conformity

Most states conform to federal Section 280A treatment — meaning the rental income is also state-tax-free. A few states (California, New York) may have nuances. Check your state-specific page.

Common Augusta Rule mistakes

• Renting more than 14 days. Day 15 destroys the entire deduction structure.
• No business purpose. "Annual self-meeting" doesn't qualify. The event must be a real business activity.
• Excessive rate. Renting your home for $10,000/day when comparable venues charge $1,500/day is a red flag.
• No documentation. Without contract, agenda, attendee list, and rate research, you lose in audit.
• Mixing personal and business use on same day. If the day starts as personal and ends as business, the IRS may disallow.
• Sole proprietor / single-member LLC (Sch C). The Augusta Rule does NOT apply. The "business" and "you" are the same taxpayer for federal income tax — Tax Court has consistently disallowed Sch-C-to-personal Augusta deductions. Convert to S-corp first if you want this strategy.

The "personal" test

If you (the homeowner) attend the event yourself, days you participate count as personal use of the home for that day in some interpretations. Most CPAs handle this by holding events on days you'd be home anyway and being clear that you're attending in your business capacity, not as homeowner.

Worked example: S-corp owner using the Augusta Rule

Consider an S-corp consultant in suburban Atlanta. Their home would rent on Airbnb for $400/night (verified by 3 similar local listings). They hold 12 quarterly planning sessions throughout the year — 12 days × $400 = $4,800. Plus 2 client appreciation events (Holiday party, summer client gathering) at $1,500/day venue rate (catering / setup needs justify higher rate) = $3,000. Total Augusta Rule rent: $7,800.

• The S-corp pays $7,800 to the homeowner as rental expense, deducting it on the S-corp's Form 1120-S.
• The homeowner reports the $7,800 as rental income on Schedule E, then EXCLUDES it under Section 280A(g) since the property was rented ≤14 days — net tax: $0.
• Net effect: S-corp deducts $7,800. Homeowner pays no tax on the $7,800. Savings at owner's combined federal+state+SE rate (~37% example): $2,886.
• Implementation cost: ~$300-$500 in first-year CPA setup + $200/year ongoing. Pays for itself almost immediately at meaningful rent levels.

How to determine fair-market rent (the critical audit factor)

The IRS scrutinizes Augusta Rule arrangements specifically for inflated rent claims. Document fair market rent BEFORE each rental event with at least one of these methods:

1. Airbnb / VRBO comparables — pull 3 similar properties' nightly rates within 5 miles. Screenshot each listing with date stamp. Average the three.
2. Local hotel meeting room quotes — get a written quote from 2-3 local hotels for similar capacity meeting space. Useful for "business event" rentals where the comparable isn't a residential rental but a meeting venue.
3. Local Realtor opinion letter — for $50-$150, get a written opinion from a residential real estate agent about market rent for short-term rental in your area. Most defensible documentation.
4. Peerspace / Splacer listings — peer-to-peer venue rental platforms can establish event-day rates that often exceed nightly Airbnb rates.

The cleanest approach: combine methods (Airbnb baseline + Peerspace event rate + Realtor opinion). If audited, you have multiple corroborating data points instead of one.

Frequently asked questions

Can I use the Augusta Rule with a regular sole proprietorship (Schedule C)?
No. Section 280A(g) requires a separate-entity tenant — S-corp, multi-member LLC taxed as partnership, or C-corp. As a sole proprietor or single-member LLC, you and the business are the same taxpayer under federal tax law; the IRS disallows the deduction because you can't rent property to yourself. If you want to use the Augusta Rule, file Form 2553 to elect S-corp treatment first (see the S-corp election guide), then the S-corp can rent your home and deduct the rental expense.

What counts as a "business meeting" for Augusta Rule purposes?
Strategic planning sessions, board meetings, training sessions, client appreciation events, team retreats, advisory board meetings. The IRS doesn't strictly define "meeting" but expects substantive business activity. Send agendas in advance; produce meeting minutes/notes afterward; document who attended and what was decided.

What if my home is more like a regular suburban tract house — is the rent really $400/night?
Probably not. Be honest with comparables. A $200-300/night fair-market rate is typical for a 3-4 bedroom suburban home in most US markets. The Augusta Rule still saves you $2,800-$4,200 at 14 days × $200-300 — meaningful but not dramatic. Don't inflate to chase bigger numbers; that's exactly what triggers audit.

Can my spouse and I split the rental income?
If the home is jointly owned and you file MFJ, splitting is automatic — the income gets reported on your joint return. No additional benefit from splitting. The Section 280A(g) exclusion applies to both of you as joint owners.

If I rent out the home for 14 days under Augusta AND 10 days via Airbnb, can I exclude both?
No — Section 280A(g) requires TOTAL rentals (all combined) to be ≤14 days. 14 + 10 = 24 days = ALL income (including the 14 Augusta days) becomes taxable. Track total rental days carefully if you're already an active Airbnb host.

Bottom line

The Augusta Rule is a real, IRS-blessed tax strategy when applied correctly: rent your home to your business up to 14 days/year, with legitimate business purpose, fair-market rate, and full documentation. For high-income S-corp owners, this can shelter $14,000-$30,000/year from federal tax. Set it up with a CPA the first year, then run it annually with consistent documentation. Avoid combining with active Airbnb hosting unless you carefully track combined rental days. Use our calculator to estimate the tax savings at your bracket.

This article is for educational purposes only. It is not personalized tax, legal, or financial advice. Quarterly1099 is published by Vincent Roy and is not a CPA, EA, or licensed tax preparer. All content is sourced from IRS publications and current tax law. Fact-checked against IRS publications and 2026 Rev. Proc. 2025-32. For your specific situation, consult a licensed CPA or Enrolled Agent. See our full disclaimer.

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