Your home can occasionally serve a legitimate business purpose without becoming a full-time rental property. Under the Augusta Rule, qualifying homeowners can rent their residence for fewer than 15 days during the year and exclude that rental income from federal gross income. For business owners, a properly structured rental may also produce a deduction for the company paying the rent. We start with the business need, reasonable pricing, and documentation—not a predetermined tax savings target.

How the Augusta Rule works

The Augusta Rule is the common name for Internal Revenue Code Section 280A(g). It applies when a dwelling unit is used as a residence and is actually rented for fewer than 15 days during the tax year. Qualifying rental income is excluded from gross income, and deductions attributable to that rental use are not allowed. IRS Publication 527 explains this special rule for short-term rentals of a home.

The nickname comes from homeowners renting residences during the Masters golf tournament in Augusta, Georgia. The federal rule is not limited to Augusta, golf events, or vacation rentals. A primary residence rented to a business for a genuine planning session or other appropriate business meeting can potentially qualify.

The homeowner's exclusion and the company's deduction are separate questions. Section 280A(g) governs the homeowner's treatment. The company must independently establish that its rent payment qualifies as an ordinary and necessary business expense under Section 162. A tax-free receipt for the owner does not automatically create a deductible expense for the business.

Who qualifies—and which businesses need extra care

Under Section 280A(d), a dwelling is generally used as a residence when personal use exceeds the greater of 14 days or 10% of the days rented at a fair rental price. A regularly occupied primary residence usually satisfies this test. A second home may also qualify, depending on its actual use.

  • Stay below 15 rental days. Count all actual rental days for that residence during the tax year, including rentals unrelated to your business.
  • Use a genuine business arrangement. The company must have a credible reason to rent the space and must actually use it as agreed.
  • Confirm the tax identity of the renter. A corporation is generally a separate taxpayer. A sole proprietor generally cannot create a deductible rent payment by paying themselves.
  • Review disregarded entities. A single-member LLC without a corporate tax election generally does not create a separate federal taxpayer from its owner.
  • Review ownership and employee status. Related-party transactions, co-ownership, and rentals to an employer require additional analysis.

Section 280A(c)(6) restricts certain homeowner deductions when an employee rents space to an employer and uses that space to perform employee services. It does not automatically eliminate the Section 280A(g) income exclusion, but it makes it especially important to distinguish the homeowner's tax treatment from the employer's deduction.

The limit is 14 days, not 14 days per business or per event type. If the residence is rented for 15 days or more, the exclusion disappears for that year, and the applicable rental-income and deduction rules must be evaluated.

Set a defensible rate before the event

The rental rate should reflect what an unrelated business would reasonably pay for comparable space under comparable circumstances. There is no IRS-approved daily rate or universal maximum deduction. A large home or expensive ZIP code does not, by itself, justify a substantial meeting charge.

We look for contemporaneous comparisons that fit the actual rental: meeting capacity, location, duration, privacy, available rooms, equipment, and included amenities. Local meeting venues and comparable event spaces may provide better evidence than overnight vacation-rental listings. When a comparison includes catering, staffing, or lodging that your home does not provide, adjust for those differences.

Keep dated quotes, screenshots, and a short explanation of the selected rate. A full-day venue price may not support a two-hour meeting charge. Likewise, repeating the same short meeting throughout the year does not establish that each rental was necessary or reasonably priced.

The numbers: a qualified business rental

Assume an S corporation rents its shareholder's primary residence for six full-day strategy meetings during the year. Comparable local meeting spaces support rent of $1,000 per day for the facilities provided. The corporation pays $6,000, the meetings actually occur, and the residence has no other rental days.

  • Homeowner: If the residence requirements are met, the $6,000 is excluded from federal gross income under Section 280A(g).
  • Business: If the payments satisfy Section 162 and other applicable rules, the corporation may deduct $6,000 of rent.
  • Illustrative benefit: At an assumed 35% marginal federal income tax rate, a fully effective $6,000 deduction would reduce federal income tax by approximately $2,100 before other tax interactions.

That illustration is not a projected result. The owner's basis, loss limitations, qualified business income deduction, and other circumstances can change the benefit or its timing. The $6,000 payment itself is not $6,000 of tax savings, and the homeowner cannot separately deduct rental-use expenses against the excluded income.

Common mistakes and IRS scrutiny

Owner-controlled rentals deserve careful review because the same person may influence both sides of the transaction. Examiners can challenge business purpose, pricing, payment, and substantiation. Courts have rejected or reduced related-party meeting-rent deductions when the evidence did not support the amount claimed.

  • Inventing meetings after year-end: A journal entry and generic invoice do not establish that a rental occurred.
  • Charging unsupported rates: Price the space actually used, not an aspirational luxury venue.
  • Mixing business and entertainment: A social gathering does not become deductible merely because customers attend. Section 274 can limit or disallow entertainment and meal expenses.
  • Missing other rental days: Vacation-platform bookings and private rentals count toward the same annual limit.
  • Double-counting deductions: Section 280A(g) does not authorize homeowner deductions attributable to the excluded rental activity. Otherwise allowable personal deductions remain subject to their own rules.

Payment timing and information reporting also matter. Related-party accrual rules under Section 267 can affect when a deduction is available. Business rent payments may trigger Form 1099-MISC reporting obligations even when the homeowner qualifies for an income exclusion. We review reporting and return presentation together to avoid unexplained mismatches.

How SWITCH implements the Augusta Rule

We first confirm the residence's use, expected rental calendar, entity classification, ownership, and business purpose. Next, we evaluate comparable rates and the likely benefit after relevant tax limitations. We also review state treatment separately, including California conformity and any applicable local rental requirements.

Before implementation, we establish a documentation checklist: written rental terms, business approval, rate support, agendas, attendee lists, evidence of completed meetings, invoices, and traceable payments. Afterward, we reconcile the annual rental-day count and coordinate the business deduction, homeowner exclusion, and information reporting.

SWITCH provides tax strategy and compliance guidance, not legal advice. When contracts, entity arrangements, or local restrictions require legal analysis, we coordinate with licensed attorneys. Request a free consult with our team to evaluate whether the Augusta Rule fits your home, business, and tax position.