IRS Section 280A(g): What You Should Know About the Augusta Rule

Tax efficiency is the art of keeping more of what you earn without crossing the line into risky schemes. Buried deep in the Internal Revenue Code is a gem that fits this mission perfectly: the Augusta Rule. Named after the homeowners in Augusta, Georgia, who rent their properties to golf fans during the Masters Tournament, the rule lets a homeowner collect up to 14 days of rental income each year without reporting a single dollar of it as taxable income.

The twist—and the reason business owners are paying attention—is that you can legally rent your own home to your company, pocket the proceeds tax-free, and let the business deduct the rent. Done correctly, it is a rare, IRS-blessed way to move money from your corporation into your pocket without triggering a tax bill.

What Is the Augusta Rule?

Origin in Augusta’s Masters Tournament

The story begins in the 1970s, when residents of Augusta discovered that golf spectators would pay a premium to stay in private homes near the iconic course. Property owners lobbied Congress to allow short-term rentals without drowning in paperwork. Lawmakers responded with Section 280A(g) of the Internal Revenue Code, better known today as the Augusta Rule.

Legal Basis in Section 280A(g)

Section 280A(g) states that if you rent out a dwelling unit you use as a residence for no more than 14 days during the year, the income from that rental is not included in your gross income. You also cannot claim expenses related to those rentals, but that is a small trade-off for completely tax-free revenue.

Think of the rule as a miniature safe harbor. If you stay under the 14-day ceiling and charge a fair market rate, the IRS treats the transaction as though it never happened on your personal return. No Schedule E, no extra forms—just pure, untaxed income.

Key Limitations to Respect

First, you must keep the rental period under 15 days in the calendar year. Second, the rate must reflect what an unrelated party would pay for comparable space. Third, the property has to be one you use personally—a primary home, vacation home, or even a boat if that is where you live part-time. Violate any of these guardrails and the protection disappears.

How the Augusta Rule Works in Practice

A homeowner schedules a qualifying event—perhaps a strategy retreat or a client dinner—in the house. The business drafts a simple rental agreement, sets a day rate based on market data, and pays that rate by check or electronic transfer. The company records the payment as a legitimate rent expense on its books.

The homeowner receives the money, but because the total number of rental days for the year is 14 or fewer, none of it shows up on the individual tax return. No deductions for cleaning fees or utilities are allowed on the personal side, yet the zero-tax income more than compensates.

The Augusta Rule for Business Owners

Renting Your Home to Your Own Business

A business owner can leverage the rule by turning the residence into an occasional off-site venue. Corporate bylaws often require annual meetings. Marketing teams need quiet spaces to film content. New-product brainstorming sessions benefit from a relaxed environment. When these gatherings happen in your living room or backyard, the company simply becomes a tenant for the day.

Legitimate Business Uses That Satisfy the IRS

Annual shareholder meetings qualify because formal minutes must be taken and retained anyway. Multi-day planning sessions provide documented agendas and attendee lists. A refined dinner where clients review contracts or a small retreat for staff training can also work, provided you keep evidence that the purpose was business, not a birthday party in disguise.

Documentation That Turns Skepticism Into Compliance

The backbone of compliance is a paper trail. A rental agreement sets the terms. Meeting agendas or minutes establish the business purpose. Screenshots from Airbnb or quotes from local event venues prove the rate is reasonable. Bank statements confirm money changed hands. When assembled, these records tell a cohesive story an IRS agent can follow without raising an eyebrow.

Example Scenarios

The Small Business Owner

Imagine an LLC whose sole member rents her home to the company for 10 strategy days each year at $750 per day. The firm records a $7,500 rent expense. She reports 0 rental income personally because she stayed under 14 days. Many entrepreneurs already rely on tax and accounting services for small businesses to align the paperwork, making the process straightforward and audit-ready.

The Real Estate Agent

A real-estate professional hosts monthly buyer seminars in a spacious living room, charging her S-corp $1,000 per event. 12 gatherings equal $12,000 in rent, which keeps the rental days below the 14-day limit in the Augusta Rule, so the full amount escapes taxation. Photos of each seminar and sign-in sheets support the deduction.

The Medical Practice Owner

A doctor invites the clinic’s staff to an annual team-building retreat and holiday celebration at her country home. Comparable hotel meeting rooms would cost far more, so the practice deducts a reasonable rent and saves $3,000+ while the doctor enjoys tax-free compensation.

The Investor or Advisor

An investment advisor runs quarterly mastermind sessions, hosting accredited investors for deep-dive workshops. He documents fair rates by printing listings of similar short-term rentals in the neighborhood. Each session becomes a dual win: a deductible expense for the advisory firm and untaxed income for the host.

The Cautionary Tale

Not every story ends well. One entrepreneur doubled the going rate in an attempt to extract extra tax-free cash and failed to keep meeting minutes. The IRS denied both the deduction and the exclusion, converting every rental dollar into taxable income and adding penalties for good measure. The lesson is clear: stay within the 14-day rule, document everything, and charge only what the market supports.

How to Calculate Fair Market Value (FMV)

Using Comparable Rentals

Begin by searching Airbnb, VRBO, or local event spaces for properties similar in size, amenities, and location. Capture the nightly or daily prices, noting any seasonal fluctuations. A short paragraph in your corporate minutes summarizing these findings—and attaching dated screenshots—creates a timestamped record.

Adjusting for Unique Features

If your home includes a media room perfect for video shoots or a garden suited for retreats, those extras can merit a premium. Document the comparable commercial venues that offer similar perks to reinforce your rate. Repeat the exercise each year because markets shift, and the IRS appreciates current proof.

Documentation Best Practices

Start with a written rental agreement that outlines dates, the daily rate, and payment terms. Add meeting minutes or agendas listing the business objectives and attendees. Include your fair market value research as attachments. Show evidence of payment such as a cleared check or ACH confirmation.

Finish with photographs of the setup—whiteboards filled with notes, seating arrangements, or catering trays. Store the entire package with your corporate records for at least 7 years to match typical IRS look-back periods.

Legal Boundaries and IRS Pitfalls

The IRS scrutinizes anything that smells like self-dealing. Renting your home for a family reunion and calling it a shareholder meeting is an invitation to trouble. Deductions for utilities, housekeeping, or lawn care related to the event are off-limits on your personal return. Most importantly, renting the property for a 15th day makes every penny of the year’s rent reportable on Schedule E and potentially reclassifies the expense as nondeductible.

Integrating the Augusta Rule Into a Broader Tax Strategy

A well-designed tax plan treats the Augusta Rule as one cog in a larger machine. Pairing it with a legitimate home-office deduction lets you capture ongoing workspace costs while reserving the Augusta days for special events. Real-estate investors might layer cost-segregation studies to accelerate depreciation. S-corp owners can fine-tune their salary versus distribution mix and let the Augusta rent serve as an extra, tax-free benefit.

Family-owned enterprises sometimes create management companies to centralize fees, with the Augusta rent emerging as one more efficient payout. When stitched together thoughtfully, these tactics form an elegant patchwork of tax-free and tax-advantaged income.

Step-by-Step Implementation Guide

Executing the Augusta Rule is straightforward once you know the checkpoints. Follow the sequence below to transfer tax-free rent from your company to your personal account while staying fully compliant.

1. Determine a Fair Market Daily Rate. Gather recent comps from Airbnb, VRBO, or local event venues and document them in your corporate records.
2. Plan Up to 14 Bona Fide Business Events. Choose meetings, retreats, or filming days that genuinely advance company goals while fitting within the annual limit.
3. Draft and Sign a Rental Agreement. Put the rate, dates, and payment terms in writing before hosting the first event.
4. Document Purpose, Attendees, and Outcomes. Keep agendas, attendance sheets, minutes, and quick photos of each gathering to prove the business intent.
5. Have the Company Pay You by Check or ACH. Record the expense in the general ledger and retain bank confirmations as proof of payment.
6. Deduct on the Corporate Return and Omit Personally. Claim the rent as an ordinary and necessary business expense, then leave the income off your personal tax return, confident you have met every requirement.

Tax-Free Doesn’t Mean Risk-Free

The Augusta Rule is a brilliant, perfectly legal method to move money from a business to its owner without taxation, but only when every requirement is met and every document is in place. It rewards diligence and punishes shortcuts.

Treat it with the respect you would give any IRS regulation, maintain airtight records, and enjoy the peace of mind that comes with compliant, tax-free income. Before you schedule that first board retreat in your living room, sit down with a qualified CPA or tax advisor to make sure your implementation is flawless.

State Income Tax Treatment Under the Augusta Rule

While many states either impose no individual income tax or generally conform to the federal treatment of rental income under the Augusta Rule, not all of them do. In some cases, you can have no federal tax due on Augusta Rule income while your state still treats those same payments as taxable income on your individual income tax return.

Because state rules on conformity, sourcing, and special exclusions vary widely—and change over time—it is critical to confirm how your specific state handles Augusta Rule rentals before assuming the income is completely tax-free. Reach out to the trusted advisors at Small Business Taxes LLC today for clear, state-specific guidance on how the Augusta Rule applies to you.