The Definitive Guide to
The Augusta Rule
How to legally transfer over $14,000 from your business to your personal bank account, tax-free, by renting your home to your S-Corp.
Written by Bryan Martin, CPA, Managing Partner and Founder of Taxstra. Last updated July 10, 2026.
What Is the Augusta Rule?
Quick Answer
The Augusta Rule (IRC Section 280A(g)) lets you rent out your home for 14 or fewer days per year and pay zero federal income tax on the rent you collect. The income doesn't even go on your return. Business owners use it by having their business rent their personal residence for legitimate meetings, retreats, or events at fair market rates: the business deducts the rent, and the owner excludes it from income. At $1,000 per meeting day, 14 days moves $14,000 out of the business tax-free.
It works for any homeowner (the classic example is Augusta residents renting to Masters spectators), but the version that matters for readers of this guide is the business-owner version. The rest of this guide covers exactly how to run it without handing the IRS an easy audit win: the fair-market-rent evidence, the corporate minutes, and the mistakes that unravel it.
Why Would Congress Allow This?
It is rare that the IRS gives you a "free lunch." Usually, every dollar of income is taxed, and every deduction is scrutinized. The Augusta Rule is a fascinating exception because it wasn't originally designed for small business owners. It was designed for wealthy homeowners in Augusta, Georgia.
Every year, the Masters Golf Tournament descends upon Augusta. The town, relatively small, runs out of hotel space almost immediately. For decades, local residents have rented out their homes to golfers, corporate sponsors, and spectators for astronomical sums during tournament week.
In the 1970s, the residents of Augusta lobbied Congress. They argued that it was unfair to force them to treat their homes as "rental businesses" just because they rented out their homes for one week a year. They argued it was "incidental" income.
Congress listened. They enacted Internal Revenue Code Section 280A(g).
IRC Section 280A(g)(2):
"If a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then... the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer..."
The law is simple but powerful. It states two things:
- You do not report the income.
- You cannot deduct expenses associated with the rental (like cleaning or utilities), essentially treating the activity as if it never happened for tax purposes.
While the residents of Augusta were happy, savvy tax strategists realized this statute applied to everyone in the United States. And specifically, it created a massive arbitrage opportunity for S-Corp owners.
The Augusta Rule Is Section 280A(g): What the Statute Actually Says
"Augusta rule" is a nickname. The law is one short subsection of the code, Section 280A(g), and it has exactly four moving parts. Meet all four and the exclusion is automatic; there is no election to file and no form to attach.
A dwelling unit you use as a residence
A house, condo, apartment, or vacation home counts as your "residence" if your personal use for the year exceeds the greater of 14 days or 10% of the days it is rented at fair value (Section 280A(d)(1)). Your primary home clears this test automatically.
Actually rented fewer than 15 days
The statute says "actually rented for less than 15 days during the taxable year." In practice: 14 rental days maximum, per dwelling unit, per tax year. Day 15 ends the exclusion for the entire year.
The rent is excluded from income
Section 280A(g)(2): the income "shall not be included in the gross income" of the taxpayer. It never touches your 1040. This is an exclusion, not a deduction you claim.
No deductions for the rental use
Section 280A(g)(1): you cannot personally deduct expenses attributable to those rental days (cleaning, utilities, supplies). The trade-off is one-sided in your favor; your business still deducts the rent it pays as an ordinary expense.
How the 14 Days Are Counted
- It is a cliff, not a phase-out. Rent the home 15 or more days in the year and the exclusion disappears for all of it: every dollar of rent for the year becomes reportable rental income under the normal rules, not just day 15.
- Partial days count as days. A four-hour board meeting still occupies the home that day. Count any partial rental day as a full rental day; there is no hourly prorating.
- The count is per dwelling unit, per tax year. The clock resets on January 1, and each dwelling you use as a residence gets its own count.
How S-Corp Owners Use It
The "arbitrage" works because you sit on both sides of the transaction. You are the landlord (personally), and you are the tenant (your business).
Normally, when your business pays you money, it is taxable. It's either Salary (W-2, taxed), Dividends (taxed), or Distributions (not taxed, but not deductible to the business).
Rent is different.
The "Double Dip" Effect
When your S-Corp rents your home for a valid business meeting, two things happen simultaneously:
Get a Deduction
Your S-Corp writes a check for "Facility Rental." This is a standard operating expense, just like renting a WeWork or a hotel conference room. It lowers the business's taxable profit.
Pay Zero Tax
You receive the check. Because you rented the home for 14 days or less, Section 280A(g) says you ignore this income. It does not go on your 1040. It is completely tax-free cash.
This effectively moves money from a taxable bucket (your business profit) to a tax-free bucket (your personal savings) legally. This is a cornerstone of strategic tax planning. Explore our full range of tax planning services to see how we help business owners implement strategies like this.
Valid Business Purposes
You cannot just pay yourself rent for sleeping in your own bed. The business must have a legitimate reason to rent a facility. This strategy is especially popular among physicians who own practices. Learn more in our physician tax planning guide. Common valid reasons include:
- Monthly Board of Directors Meetings: Reviewing P&L, approving strategy, compliance minutes.
- Strategic Planning Sessions: Quarterly deep-work sessions to map out company direction.
- Employee Retreats: Team building or training off-site (even if "off-site" is your home).
- Video/Content Production: Using your home aesthetic as a studio set.
- Client Entertainment: Hosting a dinner or event for clients (requires strict documentation).
If you are a single-member S-Corp, the "Board Meeting" is the most common and defensible strategy, provided you actually hold the meeting and document it.
How Much Can You Charge?
This is where most people get nervous, and rightfully so. You cannot charge $50,000 for a one-day meeting in a one-bedroom apartment. The rent must be "Reasonable" and based on "Fair Market Value" (FMV).
FMV is defined as what a willing buyer (tenant) would pay a willing seller (landlord) in an arm's length transaction. Since you are both parties, you must look to the outside market for data.
How to Determine Your Daily Rate
You are not renting a bedroom; you are renting a meeting facility. Do not look at Airbnb prices for a bedroom. Look at prices for event spaces, hotel conference suites, and peerspace listings.
Step-by-Step Comparables Process:
- Identify Comparable Venues: Look for local hotels, country clubs, or co-working spaces that offer meeting rooms.
- Match the Amenities: Does your home offer a large conference table (dining table)? A/V equipment (large TV)? Privacy? Catering capabilities (kitchen)? WiFi? Parking?
- Get Quotes: This is critical. Call the local Marriott or WeWork. Ask: "How much to rent a private meeting suite for 8 hours for 4 people, including setup, A/V, and cleaning fees?"
- Print to PDF: Save these quotes. If the Marriott creates a quote for $1,200/day, and your home is nicer than the Marriott conference room, $1,200 is your defensible daily rate.
What Happens When the Rate Is Made Up: Sinopoli
The Tax Court showed exactly how this plays out in Sinopoli v. Commissioner (T.C. Memo. 2023-105). Three S-Corp owners deducted roughly $290,000 of rent over three years for monthly meetings at their homes, at rates around $3,000 per meeting, with thin meeting records and no comparable-rate evidence. The court did not reject the strategy itself. It allowed rent at $500 per documented meeting, the going local rate for meeting space, and disallowed the rest, including one full year that had no meeting notes at all.
The takeaway is posture, not panic: the rule holds up when your rate matches real quotes you saved before the meetings and every rental day has minutes behind it.
Taxstra Tip
Date-stamp your comps. Pull venue quotes before the meetings happen, not at tax time, refresh them once a year, and keep them in the corporate file next to the minutes. A rate you can trace to a printed quote is a rate the IRS has a hard time arguing with.
The Multiplier Effect
Once you establish a daily rate, sticking to the 14-day limit is key.
- Daily Rate: $1,000 (Conservative example)
- Max Days: 14
- Total Deduction: $14,000
- Tax Saved (approx 30% rate): $4,200
If you have a luxury home in a high-cost-of-living area (NYC, SF, Miami), your daily rate could easily be $2,500+, making this a $35,000 deduction.
Audit Defense: If It Isn't Written, It Didn't Happen
The IRS is aware of this strategy. They don't mind it, as long as it is real. If you just transfer money and label it "Augusta," you will lose in an audit. You need a "Paper Trail of Intent."
The 5 Essential Documents
1. The Rental Agreement
A standing lease agreement between the S-Corp and You. It should state that the S-Corp desires to rent the property for meetings from time to time, and sets the terms (e.g., "Company agrees to pay $1,200 per daily use").
2. The Corporate Resolution
A board resolution, adopted in your minutes, authorizing the company to rent the owner's residence for business meetings at the documented market rate. It turns the arrangement into standing corporate policy instead of a year-end idea.
3. The Invoice
For every rental, generate an invoice. "To: My Company. From: Me. Date: June 15th. Service: Facility Rental for Board Meeting. Amount: $1,200."
4. Corporate Minutes
This proves the business purpose. "Meeting called to order at 9:00 AM at [Home Address]. Attendees: [Names]. Topics Discussed: Q2 Financial Review, Marketing Budget Approval. Meeting adjourned at 4:30 PM."
5. Proof of Payment
A physical check or a digital transfer. Do not just make a journal entry. Money must move.
Why Minutes Matter Most
In tax court cases regarding home office and rental deductions, the judge almost always looks for the minutes. If you claim you had a 12-hour strategic planning retreat, but you have no notes, no agenda, and no resolutions passed, the judge will classify it as a personal day.
The 1099 Question and Where the Rent Shows Up
On the corporate side, the S-Corp deducts the payment as rent expense on its Form 1120-S, the same as any other facility rental. On your personal side, the excluded income is reported nowhere: no Schedule E, no other-income line, nothing on the 1040.
That asymmetry is why the 1099 question matters. Rent of $2,000 or more paid in the course of a trade or business to a non-corporate landlord is reportable in Box 1 of Form 1099-MISC (the threshold rose from $600 to $2,000 for tax years beginning after 2025). A 1099 issued to yourself tells IRS matching to expect rental income on your return that the exclusion says will not be there. Practitioners resolve it two ways: issue the 1099 and have your preparer report the amount on Schedule E with an offsetting entry labeled "Section 280A(g)", or document the exclusion in the corporate file without the form. Decide it deliberately with your preparer; the wrong answer is not thinking about it at all.
The 280A(g) Compliance Checklist
- Home qualifies as your residence, not a full-time rental property
- 14 or fewer rental days for the year, tracked per home
- Written rental agreement and corporate resolution on file
- Market-rate quotes saved before setting your daily rate
- Agenda and minutes for every rental day
- Invoice issued and rent actually paid from the business account
- 1099 treatment decided with your preparer and documented
How to Ruin This Strategy
While powerful, the Augusta Rule is strict. There is no gray area on the day count. Here are the most common ways business owners blow it.
1. The 15th Day Trap
The law says "less than 15 days." If you rent your home for 14 days, it is tax-free. If you rent it for 15 days, ALL 15 days become taxable. You fall off the cliff. There is no pro-rating.
Best Practice: Stop at 14. Or 13 to be safe.
2. The "Party" Problem
Do not label the event "Christmas Party" or "Summer BBQ" unless you have a robust business component. Entertainment expenses are generally disallowed under current tax law (TCJA). Facility rentals are allowed, but if the facility is just used for a party, the IRS may reclassify it as entertainment. Always focus on the meeting aspect.
3. Price Gouging
"I'll charge $10,000 for a Tuesday because I'm the CEO." No. This is tax evasion. If reasonable rent is $1,000 and you charge $10,000, the IRS will disallow the $9,000 excess and potentially treat it as a dividend (taxable to you, not deductible to the corp).
4. Sole Proprietors
You cannot rent to yourself. If you are a Sole Prop (Schedule C), you are legally the same entity as your business. You cannot write a check from your left pocket to your right pocket and call it an expense. You MUST be a separate legal entity (S-Corp, C-Corp, or Partnership) to use this strategy.
Common Questions
About the Author: Bryan Martin, CPA
Bryan Martin is the founder of Taxstra and a Certified Public Accountant specializing in tax strategy for high-income business owners and real estate investors. He focuses on proactive planning to help clients legally minimize their tax liability.
Read Full Bio →Authoritative Sources
- IRC §280A(g): Special rule for residence used less than 15 days
- IRC §280A(d): Use as residence (14-day / 10% rule)
- IRC §162: Trade or business expenses (ordinary & necessary)
- IRS Publication 527: Residential Rental Property
- IRS Instructions for Forms 1099-MISC and 1099-NEC: rents reporting threshold
Citations reflect U.S. federal tax law as of the article's last reviewed date.
Strategies Often Paired With the Augusta Rule
S-Corp Election & Reasonable Compensation
The Augusta Rule pairs naturally with an S-Corp: the corporate deduction creates the tax-free transfer.
Home Office Deduction
Home office covers your dedicated workspace year-round. Augusta covers common areas for specific meeting days. They coexist.
Cost Segregation Studies
For real-estate-owning S-Corps, cost seg accelerates depreciation on the corporate side while Augusta moves cash personally.
Augusta Rule Calculator
Estimate the maximum tax-free rent your dwelling can support based on local fair market comps.
Implementation is Everything.
Knowing the rule is 10% of the battle. The other 90% is the paper trail. At Taxstra, we provide the lease agreements, corporate minute templates, and guidance to make this strategy audit-proof.