Augusta Rule
Section 280A(g)
Learn how to legally rent your home to your business for up to 14 days per year and exclude the income using the Augusta Rule. Discover tax-saving tips for small business owners.
Everything You Need to Know About the Augusta Rule
Do you own a piece of real estate that your business could use? Did you know that there is a provision in the current tax code that allows homeowners to receive tax-exempt rental income? The Augusta Rule has been around since the 1970s, allowing both homeowners and businesses to enjoy favorable tax savings.
Understanding the basic components of the Augusta Rule and how your business can leverage this tax exemption is critical to not only reduce your personal tax liability, but to lower the taxable income of your business.
Who Qualifies for the Augusta Rule?
To leverage the tax advantages of the Augusta Rule, you must have a legitimate corporation. This means that sole proprietors and single-member LLCs are excluded from using this tax break. Partnerships, c corps, and s corps are the qualifying business structures that can use Section 280A.
The good news is that you can change business structures if you want to take advantage of this rule. However, before making that decision, it’s best to consult with an expert to weigh all factors.
What is the Augusta Rule?
The Augusta Rule, referred to as Section 280A by the IRS, allows homeowners to rent their home for up to 14 days each tax year without being required to pick the money up as rental income on their individual tax returns.
The Augusta Rule was originally placed in service for residents of Augusta, Georgia, where the Masters golf tournament was held. Now, this rule is widely used by both homeowners and businesses.
How Does the Augusta Rule Work?
When a homeowner rents their personal residence to a business or other individual for 14 days or less, the income does not need to be reported. This means that a shareholder of a corporation can rent out their personal residence to the business for a specific business purpose without being required to report the income.
Looking at an example can be beneficial. Let’s say you are the sole shareholder of ABC Corp, and you currently have a beach house in Tampa, Florida. Your company is looking for a place to hold a quarterly weekend retreat for employee training. You decide that ABC Corp will use your vacation home for 2 days every 3 months, totaling 8 days out of the year.
To use the Augusta Rule, you would need to look up the fair market value of homes in your area and charge ABC Corp that rate for each of the 8 days. ABC Corp will be able to write the rent paid to you off as a business deduction, while you are not required to report any income since you are under the 14-day exclusion.
Both you and ABC Corp benefited from tax savings. You were able to receive tax-free income, while ABC Corp was able to reduce its taxable income through rent payments made to you. Although the Augusta Rule can become more complex, this example shows the significant tax-saving opportunities for both the corporation and the homeowner.
How is Section 280A Reported?
On the business side, Section 280A is reported as a regular business deduction. Depending on the use of the home, business owners have some leeway in the account classification. Common categories include employee benefits, training, and rent. If your business is issuing a 1099-MISC to the homeowner, you should classify the amounts as rent expense. There are no additional forms that the business needs to fill out to claim the rent expenses.
There are some differences in the way individuals can report the Augusta Rule on their individual tax returns, making it important to talk to your tax advisor. Some individuals choose to report the entire income amount received from the business as rental income and then create an other deduction line item called “non-taxable income under IRS Code Section 280A” and others will forego reporting the income altogether. To find the best route for your situation, reach out to a tax advisor.
What are the Benefits of Claiming the Augusta Rule?
The Augusta Rule is a great tax planning strategy for homeowners who don’t regularly rent out their property and for business owners looking to reduce taxable income. If you have a property in a popular location, you can save thousands of dollars in self-employment and ordinary income taxes. Moreover, claiming the Augusta Rule allows you to give your business a place to house business meetings, seminars, and events.
The business enjoys reduced taxable income from claiming the rent amounts paid as an expense. Additionally, depending on the fair market value rate of the property, your business may save money on renting a space for business use. With the housing market and event locations skyrocketing in price, having an area that you can use might be more cost effective.
Potential Complaince Risks
- Not having a business purpose
- Not having documentation to support the business purpose
- Determining excessive fair market value rents
Maximize your tax savings
You’ve earned it. Let’s make sure you keep it.
Unlock Tax Savings with the Augusta Rule
Here’s what that can look like in practice:
- Assume your home can reasonably be rented for $3,000 per day (based on comparable local rates for meeting/event space).
- You rent it to your business for 14 days during the year for strategy meetings, board sessions, or client events.
- That creates a $42,000 business deduction (14 × $3,000).
- At a 37% federal tax bracket, that deduction reduces your tax liability by $15,540.
💡 The best part? You personally receive the $42,000 in rental income tax-free from your company. That’s a direct wealth-building strategy for business owners — while keeping more money in your pocket instead of sending it to the IRS.
Why Choose Our Augusta Rule Service Plan?
We don’t just explain the strategy — we implement it for you:
- Determine a fair rental rate for your home.
- Draft the required rental agreement and documentation.
- Guide you through board minutes and proper substantiation.
- Coordinate with your tax filings to ensure compliance and maximum benefit.
With our service plan, you can confidently leverage the Augusta Rule without the headache of figuring it out on your own.
Why Work With Us?
The Augusta Rule is powerful—but missteps can attract IRS scrutiny. At Tandy Consulting, we help you:
✅ Establish fair rental values in line with IRS guidelines.
✅ Draft compliant rental agreements and meeting documentation.
✅ Build an audit-ready file with agendas, minutes, invoices, and payments.
✅ Integrate Augusta Rule planning into your broader tax strategy (retirement, QBI, state tax, estate planning).
Our Augusta Rule Service Plan Includes:
✅ Establishing a fair rental rate for your home
✅ Drafting rental agreements and board resolutions
✅ Ensuring proper documentation for audit-proof compliance
✅ Maximizing your tax savings with a clean implementation
What's Included
Cost of Implementation
- One-time 45-minute onboarding, approximately 4 hours annually from your assigned team member
- We then do all the paperwork for you
- Custom rental valuations and all 14 events pre-scheduled to maximize the use of the Augusta Rule.
- Includes unlimited residences!
Annuall Fee:
$3,500 - $7,500
Do It Yourself
- Risk of misinterpretation of IRS Code §280A(g)
- Guesswork or generic online rental rates
- Template rental agreement (often incomplete)
- Easy to forget agendas, minutes, and sign-ins
- High audit risk without proper records
- May miss deductions or exceed 14 days
- Standalone approach
- No ongoing guidance
Work With Tandy Consulting
- Expert review and compliance with IRS Code §280A(g)
- Local comparables, hotel & Airbnb analysis, audit-ready documentation
- Professionally prepared rental contract tailored to your business
- We provide agendas, minutes, attendance logs, and board resolutions
- Complete "audit-ready" file with contracts, payments, documentation
- Optimized for maximum annual tax-free income
- Integrated with retirement planning, QBI, entity structure, and state tax rules
- Year-round proactive tax planning support
💡 Ready to see how much the Augusta Rule could save you?
Schedule a consultation with Tandy Consulting today, and let us design your personalized tax strategy.
Disclaimer
Tandy Consulting Inc. provides accounting and advisory services only to clients or prospective clients in jurisdictions where our firm and its representatives are properly registered, licensed, or exempt from registration. The content on this site is for general educational purposes and should not be interpreted as personalized financial, tax, or investment advice. Nothing here should be considered a solicitation to purchase or an offer to sell any security. Any financial strategy must be evaluated in light of your specific goals, tax position, and investment horizon. Please consult with your own legal or tax professional before acting on any information.
Any calculations or projections shown are based on a set of assumptions, including but not limited to: the client operates through a separate business entity, owns a primary residence not used as the principal place of business, and is filing either jointly or as a single taxpayer. Actual results will vary depending on taxable income, tax bracket, property rental rates, and the number of days the residence is rented to the business. These figures are illustrative only and should not be relied upon as guaranteed outcomes. Market conditions, tax law changes, and other economic factors may significantly alter results. Calculations were generated using a formula-based model and may not reflect every client’s unique circumstances. If you are eligible for a Qualified Business Income (QBI) deduction, your net benefit may be reduced.
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