For savvy business owners, tax planning is all about turning everyday expenses into smart deductions. One of the lesser-known—but incredibly powerful—tools in the tax code is the Augusta Rule. Officially recognized under Section 280A(g) of the Internal Revenue Code, this provision allows individuals to rent out their personal residence for up to 14 days per year—completely tax-free.
But what makes this especially valuable for entrepreneurs is that you can rent your home to your own business, claim a deduction at the corporate level, and receive tax-free personal income in return.
In this guide, we’ll break down how the Augusta Rule works, how business owners can use it legally and effectively, and what steps are necessary to stay compliant while maximizing tax savings.
What is The Augusta Rule?
The Augusta Rule stems from a tax law provision designed for homeowners who occasionally rent out their property. Named after Augusta, Georgia—where homeowners would rent their homes during the annual Masters golf tournament—Section 280A(g) states that:
If you rent out your personal residence for 14 days or fewer during the tax year, you don’t have to report the income on your tax return, and it remains completely tax-free.
Here are the basic conditions:
- The residence must be a personal dwelling (not an investment property).
- It can be rented to any third party, including an S-Corp, LLC, or other business entity.
- The rental term must not exceed 14 days per year.
- The home must be used for personal purposes more than 14 days per year or 10% of the time it’s rented.
If all requirements are met, any income received from the rental does not need to be included on your personal return—yet the business that paid the rent can deduct it as a legitimate business expense.
How Business Owners Can Leverage the Augusta Rule
Business owners can use the Augusta Rule by renting their personal home to their company for legitimate business purposes. This strategy converts a deductible business expense into tax-free income on the personal side.
Common use cases include:
- Board meetings
- Strategic planning sessions
- Team retreats or training days
- Client dinners or events
Here’s a typical scenario:
A business owner hosts a quarterly strategy meeting at their home. The company pays rent for the use of the space, and the payment is deducted as a business expense. Since the home is used for fewer than 15 total rental days in the year, the owner isn’t required to report that income personally.
This results in a double benefit:
- The business reduces taxable income through a legitimate deduction.
- The owner receives tax-free income without triggering self-employment or income taxes.
- With proper documentation and adherence to the rules, this can save thousands in taxes annually.
Key Requirements and Best Practices
To take advantage of the Augusta Rule without raising red flags, it’s important to follow IRS guidelines and document everything carefully. Here’s what business owners should do:
Prove the Use Was Business-Related
Only legitimate business events qualify for this deduction. Examples include:
- Shareholder or partner meetings
- Year-end financial planning
- Employee performance reviews or trainings
- Client appreciation events
- Social gatherings, birthday parties, or casual dinners do not qualify.
Keep Formal Documentation
Treat the rental transaction as if it were between unrelated parties. Make sure to:
- Create a written rental agreement outlining the terms, date, and business purpose.
- Issue an invoice from yourself (as homeowner) to your business.
- Keep minutes or agendas of the meetings conducted at your home.
- Document fair market rent for comparable local venues to justify the rate charged.
Limit Rentals to 14 Days or Less
If you rent your home to your business (or anyone else) for 15 or more days in a year, the income becomes taxable and the Augusta Rule no longer applies. Staying under the 14-day threshold is key to preserving tax-free treatment.
Don’t Forget the 1099 Rules
If your business is an S-Corp or C-Corp, it generally does not need to issue a 1099 to the homeowner under the Augusta Rule. However, consult with your tax professional, especially if the business is an LLC or sole proprietorship.
Following these best practices helps ensure the deduction holds up if ever questioned by the IRS.
Savings Illustration: How the Augusta Rule Adds Up
Let’s look at a real-world example to show how impactful the Augusta Rule can be:
Scenario:
An S-Corp business owner hosts 12 monthly board meetings at their personal residence. Local venue rentals in their area average $1,200 per day.
What happens:
- The S-Corp rents the home for 12 days at $1,200/day = $14,400
- The S-Corp deducts $14,400 as a business expense
- The owner receives $14,400 in rental income tax-free under the Augusta Rule
Result:
The business reduces taxable income by $14,400, saving potentially $4,000 to $5,000 in corporate taxes, while the owner pockets the same amount without paying a cent in income tax.
Multiply this strategy by multiple events or multiple years, and it becomes a powerful recurring tax-saving opportunity.
How to Determine Fair Market Rent for Your Home
A key component of using the Augusta Rule properly is setting a reasonable rental rate for your home. The IRS expects that any rental between a business and a homeowner—even if the homeowner owns both—reflects fair market value.
To determine a fair rate:
- Research local venue rates – Check what nearby hotels, conference rooms, or coworking spaces charge for day rentals with similar amenities (square footage, parking, location, etc.).
- Include amenities in your pricing – If your home provides kitchen use, AV equipment, or other conveniences, include these in your rate justification.
- Use documentation – Print or save venue quotes, listings, or rental receipts for comparable spaces. Keep these with your tax records in case you’re ever audited.
- Avoid arbitrary pricing – Charging too little may not benefit you, but charging too much may not hold up under IRS scrutiny. Use real-world data to back up your pricing.
Many business owners set rates between $500–$2,000 per day, depending on location and amenities. The rate should be both defensible and consistent with what a third party would reasonably pay.
Need Professional Tax Assistance?
The Augusta Rule is a legitimate, IRS-sanctioned opportunity that allows business owners to turn a portion of their home use into tax-free income—while giving their company a valid deduction. When structured properly, it’s one of the most efficient ways to move money from your business to your personal finances without triggering taxes.
But as with any tax strategy, documentation and compliance are critical. The rental must be justified, well-documented, and limited to 14 days or fewer per year.
At Dimov Tax, we help business owners build personalized tax plans that make the most of every opportunity—including the Augusta Rule. If you’re ready to lower your tax bill while keeping more of your hard-earned income, our team is here to guide you every step of the way.
Contact Dimov Tax today to learn how to implement the Augusta Rule safely and effectively for your business.