Augusta Rule §280A: 14-Day Tax-Free Home Rental

What §280A(g) actually says

The rule is one sentence in the tax code, and it is unusually clear: if you rent your personal residence for 14 or fewer days during the tax year, the rental income is excluded from gross income. Period. No reporting. No Schedule E. No allocation of expenses.

The flip side: you cannot deduct any expenses related to that rental use. No depreciation, no cleaning costs, no utilities allocation. The exclusion is a clean trade — income disappears, but so do deductions. For most small business owners, this trade is overwhelmingly favorable because the income exclusion dwarfs whatever expenses you might deduct on 14 days of use.

The provision lives at IRC §280A(g), tucked inside the broader §280A vacation-home rules that limit deductions on properties used for both personal and rental purposes. Subsection (g) is the exception to those rules: it says that if you stay below 14 days of rental, the entire section — including all its limitation machinery — does not apply to that income.

Why it’s called the “Augusta Rule”

The nickname comes from Augusta, Georgia — home of the Masters Tournament. Every April, homeowners near Augusta National Golf Club rent their homes to tournament attendees for $5,000–$20,000+ per week. Section 280A(g) lets them pocket that income tax-free because the rental period stays within 14 days. The provision was not written for Augusta homeowners specifically — it applies to any personal residence anywhere in the US — but the Masters created the highest-profile use case, and the name stuck.

The planning insight that small business owners discovered: you do not need a golf tournament. Any legitimate business rental of your home — board meetings, planning sessions, team retreats, client receptions — qualifies, as long as you stay at or below 14 days per year and charge fair market value.

How the strategy works for S-corp and partnership owners

The cleanest implementation of the Augusta Rule runs through an S-corp or partnership. Here is the mechanic:

1. Your business entity holds a legitimate meeting at your home. Board meeting, annual planning session, quarterly review, client meeting — any bona fide business purpose documented in corporate minutes or partnership records.
2. The entity pays you fair-market-value rent for the use of your home on that day. Payment goes from the business bank account to your personal bank account by check or transfer.
3. The entity deducts the rent as an ordinary business expense under IRC §162 (ordinary and necessary business expense). This reduces the entity’s taxable income.
4. You exclude the rental income from your personal tax return under §280A(g). You do not report it anywhere.

The result: one transaction creates a business deduction (reducing income subject to income tax and potentially self-employment tax) and tax-free personal income. On 14 days at $1,500/day, that is $21,000 of tax-free income plus a $21,000 business deduction.

Entity types: who can use this, and who can’t

The takeaway: if you are a sole proprietor or single-member LLC and want to use the Augusta Rule, filing Form 2553 to elect S-corp treatment is the prerequisite. That election also opens the door to self-employment tax savings on distributions above reasonable compensation — a separate benefit worth modeling if your net income exceeds roughly $60K–$80K.

Worked example: $300K consulting S-corp

A Dallas-based management consultant operates through an S-corp. Revenue: $300,000. Reasonable W-2 compensation: $120,000. The rest flows through as S-corp distributions. She owns a 3,200-square-foot home in a Plano suburb.

Setting fair market value

She pulls three comparables for event-space rental in Plano/North Dallas:

• Local hotel conference room (seats 12): $1,200/day
• Airbnb listing for comparable 3,000-sq-ft home: $1,800/day
• Dedicated event venue (similar capacity): $2,000/day

She sets her rental rate at $1,500/day — within the range of comparables, documented in a file with screenshots and printouts.

The math: 12 rental days

At her income level ($120,000 W-2 + remaining S-corp distributions), her marginal federal rate falls in the 24% bracket (single: $103,351–$197,300 for 2026). The $18,000 deduction saves $4,320 in federal income tax — and she receives $18,000 in tax-free income. If she were in California (13.3% top rate) instead of Texas, the combined federal + state savings would be closer to $6,700.

The QBI deduction under §199A may also be affected. The $18,000 rent payment reduces the S-corp’s qualified business income, which reduces her 20% QBI deduction by $3,600. Net benefit after QBI impact: $4,320 − ($3,600 × 24%) = $4,320 − $864 = $3,456 net federal tax savings. Still a clean win for a strategy that costs nothing but documentation.

The five documentation requirements that survive an audit

The Augusta Rule is legitimate. But “legitimate strategy, poor documentation” is how deductions get denied. Here is what you need in your file:

1. Written rental agreement. A simple lease between you (as homeowner) and the business entity (as tenant). Specify the property address, the daily rate, the dates, and the business purpose. Sign it. Date it. Keep it with your tax records.
2. Fair market value documentation. Two or three comparable rental rates from local venues, hotels, or short-term rental platforms. Screenshots with dates. The IRS’s question is simple: would an arm’s-length party pay this rate for this space? Your comparables answer that question before it is asked.
3. Corporate minutes or meeting records. For each rental day, document what business was conducted. Board meeting? Record the agenda, attendees, decisions made. Client event? List the attendees and business purpose. Quarterly planning session? Keep the agenda and any materials distributed. “We had a meeting” is not documentation. “Q2 board meeting: reviewed financials, approved vendor contract, three directors attended” — that is documentation.
4. Payment records. The business must pay the rent by check or bank transfer — a traceable transaction from the business account to your personal account. Not cash. Not a journal entry. Not an offset against distributions. An actual payment that shows up on both bank statements.
5. Calendar tracking. Maintain a log of every rental day. Date, hours used, business purpose, attendees. This is your proof that you stayed at or below 14 days. If the IRS asks “how do you know it was 12 days and not 16?” your calendar log answers the question.

IRS audit risk: where the red flags are

The Augusta Rule itself is not a red flag. The IRS is aware of §280A(g) and does not dispute its existence. What draws scrutiny is implementation that looks like a manufactured deduction rather than a genuine rental:

• Above-market rent. Charging $5,000/day for a 1,400-square-foot condo in a suburb where comparable Airbnb rates are $300/day. The IRS will recharacterize the excess as a disguised distribution or constructive dividend.
• No evidence of actual business use. Claiming 14 board meetings a year when the S-corp has one owner, no employees, and no board. A sole-owner S-corp holding monthly board meetings with no other attendees is thin. Having an advisory board, accountant, or contractor attend strengthens the business-purpose argument.
• Exactly 14 days, every year. Maxing out the limit every year without varying the count invites the inference that the strategy is tax-motivated rather than business-motivated. Use the days you need — if that is 8 some years and 13 others, that pattern looks organic.
• No rental agreement or FMV support. Retroactive documentation (created during an audit) is worth less than contemporaneous documentation (created before or during the rental period).

The strongest defense is substance. If your business genuinely uses your home for meetings and events, you set a reasonable rate, you document everything contemporaneously, and you do not push the daily rate to an implausible number — the strategy holds. It is a provision in the tax code, not a loophole.

The 14-day cliff: what happens on day 15

This is not a phase-out. It is a cliff. If you rent your home for 15 or more days, the §280A(g) exclusion disappears entirely — not just for day 15, but for all days. Your rental income becomes reportable on Schedule E, and the full §280A vacation-home rules apply.

Under those rules, if you also use the home personally for more than the greater of 14 days or 10% of total rental days, the property is classified as a “personal residence” and rental deductions are limited to rental income (no net loss). For a home you live in full-time, you will always exceed the personal-use test. That means: all rental income is taxable, and you can only deduct expenses up to the rental income amount. No net tax benefit.

Count your days carefully. A “day” for §280A purposes is any day for which you receive consideration for the use of the dwelling unit. A 3-hour board meeting counts as a full day. Two meetings on the same calendar date count as one day. Track by calendar date, not by event.

Common mistakes that kill the deduction

• Sole proprietor trying to rent to themselves. You and your Schedule C business are the same taxpayer. There is no genuine rental transaction. Elect S-corp status (Form 2553) to create entity separation.
• Using Venmo or cash with no paper trail. The payment must be a traceable bank-to-bank transaction. Venmo “between friends” with no memo is not sufficient. A business check or ACH transfer with a memo referencing the rental agreement is.
• Renting a space you don’t own. The exclusion applies to your “dwelling unit” — the home you use as a personal residence. You cannot rent a vacation property you rarely use and claim the 14-day exclusion while also deducting it as a rental on Schedule E for the rest of the year. Well, you can — but the 14-day exclusion only applies to the dwelling unit that is your residence, and a property that is primarily a rental is not your residence for §280A purposes.
• Forgetting the QBI impact. The rental payment reduces qualified business income on the S-corp side, which reduces your §199A QBI deduction. This does not eliminate the benefit, but it reduces it. Model both sides before setting your daily rate.

Augusta Rule vs. home office deduction: they are not the same thing

The home office deduction (IRC §280A(c)) and the 14-day rental exclusion (§280A(g)) are separate provisions that apply to different situations:

State tax considerations

Most states conform to the federal treatment of §280A(g), meaning the rental income exclusion applies for state purposes too. But check your state:

• No state income tax (9 states): Alaska, Florida, Nevada, New Hampshire (interest/dividends phased out), South Dakota, Tennessee, Texas, Washington, Wyoming. The Augusta Rule saves federal tax only — but that is still $4,000+ on a $18,000 rental in the 24% bracket.
• High-tax states: California (13.3% top rate), New York (10.9%), Hawaii (11%), New Jersey (10.75%), Oregon (9.9%). In these states, the combined federal + state savings on $18,000 of excluded income can exceed $6,500.
• States with nonconformity: a few states have their own rental-income rules or do not fully conform to §280A. Verify your state’s treatment before assuming the exclusion applies at the state level.

Key takeaways

• IRC §280A(g) lets you rent your personal residence for 14 or fewer days per year and exclude the rental income from federal gross income entirely — no reporting, no tax, no Schedule E. This is a statutory exclusion, not a loophole.
• The strategy works cleanly for S-corps, C-corps, and partnerships. The entity pays you FMV rent for legitimate business meetings at your home, deducts it as a business expense, and you exclude the income. Sole proprietors should elect S-corp status first.
• Fair market value must be documented with comparables — local venue rates, hotel conference rooms, short-term rental platforms. Keep 2–3 comparables on file. Do not inflate the daily rate beyond what the market supports.
• Five pieces of documentation protect you in an audit: rental agreement, FMV comparables, corporate minutes for each event, traceable payment records, and a calendar log of rental days.
• Day 15 is a cliff, not a phase-out. Going over 14 days triggers full Schedule E reporting and §280A vacation-home limitations on all rental days — not just the excess. Stay at or below 14.
• Factor in the QBI impact: the rent payment reduces S-corp qualified business income, which reduces your §199A deduction. The net benefit is still positive, but model both sides.