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How Business Owners Can Use The Augusta Rule Tax Strategy

How Business Owners Can Use The Augusta Rule Tax Strategy

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Money
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Eligibility
U.S. business owners who own a home that is not their primary place of business
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A narrow but legitimate tax strategy for business owners (NOT for most low-income individuals). Under IRS Section 280A(g) — the "Augusta Rule" — if you own a home AND run a business set up as an LLC, S-corp, C-corp, or partnership (a sole proprietorship does NOT qualify), your business can rent your home for up to 14 days a year for real business use (board meetings, training, client events), and you pay zero federal income tax on that rent while the business still deducts it. You must charge fair-market rent, keep records (agreement, agenda, minutes), and not exceed 14 days. California follows the rule, so the rent is also state-tax-free here. Talk to a CPA first. General info, not tax advice. Verified 2026-05-30.
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Tax-free rental income by renting your home to your business for up to 14 days per year under IRS Section 280A
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https://www.forbes.com/sites/forbesfinancecouncil/2023/02/28/how-business-owners-can-use-the-augusta-rule-tax-strategy/
Last verified 2026-05-17. Source: 26 U.S. Code § 280A(g).

Who this is for

This is a narrow tax strategy. You can use it only if all of these are true:
  • You own a home in the U.S. (it can be a primary or second home, but not a vacation home outside the U.S.).
  • You also own or run a business (LLC, S-corp, C-corp, or partnership). A sole proprietorship reporting on Schedule C does not work, because you can't rent to yourself.
  • Your home is not your business's main office.
If that's not you, skip this one. If you're a small business owner in Nevada County who holds occasional team meetings or retreats, keep reading.

What the Augusta Rule does

Under IRS Section 280A(g), you can rent your home to your business for 14 days or fewer per year and pay zero federal income tax on the rent you receive. Your business still deducts the rent as a business expense.
The nickname comes from homeowners in Augusta, Georgia who rent out their houses during the Masters golf tournament each April. The rule applies anywhere in the U.S. [Source: law.cornell.edu/uscode/text/26/280A (accessed 2026-05-17)]

The rules, plain

  1. 14 days max. Day 15 breaks the whole strategy — all the rent becomes taxable.
  1. Fair-market rent. Charge what a hotel meeting room or event space in your area would charge for the same day. Save the price quotes you used as proof.
  1. Real business purpose. Board meetings, strategy sessions, training days, client events. Not a birthday party.
  1. Paper trail. Written rental agreement, agenda for each day, attendee list, photos, and meeting minutes.
  1. Pay yourself properly. The business writes you a check or pays by transfer. The business issues you a 1099-MISC for the total rent at year-end. You report the rent on your personal Schedule E, then exclude it under §280A(g).
  1. No double-dipping. If you already claim a home-office deduction, talk to a CPA before using this rule — the IRS may treat your home as your principal place of business, which disqualifies you.

What you might save

If a comparable local venue rents for $500/day and you hold ten qualifying meeting days, your business deducts $5,000 and you receive $5,000 tax-free. At a 24% marginal rate, that's roughly $1,200 in federal tax saved. Numbers will vary by your rate, your area, and how many days you can legitimately document.

Common pitfalls

  • Inflated rent. "Renting" your home for $3,000/day when comparable venues charge $400 is the fastest way to lose an audit.
  • Missing minutes or agendas. Without contemporaneous records, the IRS can disallow every day.
  • 15+ days. Hit 15 days and you lose the exclusion for the whole year.
  • Wrong entity. A single-member LLC taxed as a sole proprietor cannot use this — there's no separate business to rent from.
  • State taxes. Most states follow §280A(g), but a few don't. California does follow it, so the rent is also state-tax-free for California residents.

Where to get help

  • A CPA or enrolled agent who works with small businesses. The setup is one-time; ongoing cost is small.
  • VITA (Volunteer Income Tax Assistance) — free tax help, but VITA volunteers generally don't handle business returns. Use them for the personal-return side only.

Sources

  • Forbes Finance Council, "How Business Owners Can Use The Augusta Rule Tax Strategy" (2023) — original article this page was built from
This page is general information, not tax advice. Talk to a licensed tax professional before acting on it.