What is the Augusta Rule?

The Augusta Rule is the common name for IRC Section 280A(g). It allows a taxpayer who uses a dwelling as a residence to rent it for fewer than 15 days during the tax year and exclude that rental income from federal gross income. The taxpayer cannot deduct expenses that arise from the rental use. Fewer than 15 days means 14 or fewer rental days.

Can a business owner rent their home to their business under the Augusta Rule?

Potentially. A business owner may rent a personal residence to a separate business entity for legitimate business events, such as board meetings, planning sessions, training days, or client meetings. The arrangement should have a real business purpose, a reasonable market-based rental rate, a written agreement, contemporaneous records, and actual payment by the business. A sole proprietor generally cannot create a deductible rental expense by paying rent to themselves. The business deduction depends on the facts and on whether the expense is ordinary, necessary, reasonable, and properly substantiated.

What happens if you rent your home for 15 days or more?

The Section 280A(g) exclusion no longer applies if the home is rented for 15 days or more during the tax year. The rental income generally must be reported under the usual rental-property tax rules, and the homeowner may need to allocate eligible expenses between personal and rental use. The 14-day limit is a hard threshold, so taxpayers should track each rental day.

What documentation is needed for the Augusta Rule?

Taxpayers should retain a written rental agreement that identifies the dates, rental rate, property use, and parties involved. Useful supporting records include meeting agendas, minutes or notes, attendee lists, invoices, proof of payment, and local venue quotes or other comparable market data supporting the rental rate. The records should show a genuine business purpose and match the business’s accounting and tax records. A qualified tax professional should review the arrangement before it is used.

Augusta Rule for Business Owners: 14-Day Tax-Free Rental Income

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Augusta Rule for Business Owners: 14-Day Tax-Free Rental Income | Dunham