What the Augusta rule is
- Rent a home you use as a residence for 14 days or fewer in the year and the rental income is excluded from income.
- You deduct nothing against those days.
- Where a business you own pays the rent, the business deducts it and you exclude it, so the same dollar is deducted by the company and excluded by you.
Have the arrangement reviewed
The rule is short; the documentation is what an examiner tests.
The Augusta rule takes its nickname from Augusta, Georgia, where homeowners let their houses to visitors during the golf tournament and pay no tax on the proceeds. The statute is section 280A(g) and it applies anywhere in the country, in any week of the year.
The IRS states the rule in Publication 527: where you use a dwelling unit as a residence and rent it for fewer than 15 days in the year, you do not report the rental income and you do not deduct rental expenses.
Who can use the Augusta rule
Any homeowner who uses the home as a residence can exclude the rent from fewer than 15 days of letting, whoever the tenant is.
To rent the home to your own business, a separate taxpayer has to pay the rent: an S corporation, a C corporation or a partnership. A sole proprietor cannot deduct rent paid to themselves, and a single-member LLC treated as a disregarded entity is treated as its owner, so it cannot either.
A single-member LLC that has elected corporate or S corporation treatment is a separate taxpayer and can.
The four conditions of the Augusta rule
All four have to hold, in the same year
- The home is a residence you use. Your main home or a second home you personally use, not a property held purely as a rental.
- Fourteen rental days or fewer across the whole year. Day fifteen does not cost you one day of the benefit. It costs you all of it.
- The rent is a fair market rate. Evidenced by comparable quotes gathered before the booking, not reverse engineered afterwards.
- No expenses deducted against it. The income is excluded, so the costs of those days are not deductible either. That is the trade, and it is the part people miss.
Where a company you control pays the rent, the company still deducts it as a business expense. The exclusion sits on your personal return, and the two sides have to agree.
At fifteen rental days in a year the exclusion is lost for that year, and the whole year’s rent becomes reportable income.
The count includes each day the home is rented in the year, to anyone. A week let during a local event plus ten company meetings is 17 days, and the exclusion is lost for the year.
Renting your home to your own business
A company you control can hold meetings at your home and pay you rent for the day. The company deducts the payment as a business expense under section 162, and you exclude it from your personal income under section 280A(g). The two are tested separately: the exclusion can stand while the deduction fails.
- A real business purpose: a meeting with an agenda, attendees and minutes recorded at the time.
- A fair market rate, evidenced beforehand: written quotes from comparable local meeting space, gathered before the booking. A rate set from the amount you wanted to move out of the company is what the Tax Court cut in Sinopoli.
- An actual payment: money moving from the company account to your personal account, on a date, against an invoice under a rental agreement dated before the meeting.
- Consistency between the two returns: the company’s deduction and your exclusion describing the same days at the same rate.
Augusta rule Tax Court cases: Sinopoli and Jadhav
In Sinopoli v. Commissioner, T.C. Memo. 2023-105, an S corporation had deducted $290,900 of rent over three years for meetings at its shareholders’ homes. The Tax Court allowed $500 per meeting, $16,500 in total, after the IRS found comparable local meeting space at about $500 a day, and called even $500 generous.
In two of the three years the court allowed only the meetings the notes substantiated. The court described the payments as a way of distributing the corporation’s earnings as rent.
In Jadhav v. Commissioner, T.C. Memo. 2023-140, decided three months later by the same judge, the Tax Court disallowed the S corporation’s rent deduction in full, including payments to the shareholders’ sons, because the payments were not ordinary and necessary under section 162, and sustained accuracy-related penalties.
Neither court disturbed the shareholders’ exclusion under section 280A(g). In both cases the family kept the exclusion and the company lost the deduction.
The Augusta rule and the 1099-MISC: how excluded rent is reported
A company that pays $600 or more of rent to an individual in 2025 reports it in box 1 of Form 1099-MISC; for payments made after December 31, 2025, the threshold is $2,000. Schedule E has no line for income excluded under section 280A(g), so the excluded amount has to be reconciled on the personal return to the 1099 the IRS also received.
In Sinopoli the shareholders reported the rent on Schedule E and excluded it under section 280A(g). How the offset is shown is for the preparer, and we set it up with the rest of the file.
Where the Augusta rule does not apply
- Rental properties. The home has to be one you use as a residence.
- The home office deduction. A different section with its own arithmetic, and taking one does not describe the other.
- Several homes. Each property is tested on its own facts.
What this work costs
Usually part of a wider engagement rather than a standalone piece. What it depends on:
- Whether an entity return is also in scope
- How many properties and how many days are involved
- Whether the rate evidence already exists or has to be built
These are the factors, not a quote.
Who prepared this
Licensed CPAs and Enrolled Agents, filing both the personal and the entity side of arrangements like this one.
“Anytime that we have a client that brings up a situation that we think is ethically incorrect or there’s a possibility of some type of a rule that’s broken, we immediately disengage, only because, you know, for license purposes… but also just for pure ethics too. It’s just not a side of anything that I want to be involved in.”
— George Dimov, CPA · Founder, Dimov Tax
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— Connor · Philadelphia, PA · Yelp review
General information rather than advice for your circumstances. Outcomes depend on facts specific to you, so speak to a CPA before acting on it.
Set it up before you use it
If a company you own is going to pay the rent, the rate evidence and the meeting record are gathered before the first payment. Send the entity type and the meeting plan and we will build the file.