The Augusta Rule for S-Corps: Renting Your Home to Your Business Tax-Free

#What §280A(g) actually says

Internal Revenue Code Section 280A is the general “vacation home” / “home office” deduction limitation statute. It applies to dwelling units (homes, apartments, vacation properties) used for both personal and rental purposes, restricting deductions to prevent double-dipping.

Subsection (g) is the carve-out for short-term rentals: “If a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then… no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed; and the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer.”

In plain English: if you rent your home for 14 days or fewer in a year, the rental income is tax-free. The trade-off is you can’t deduct rental-related expenses (which is fine — you weren’t going to deduct them anyway because it’s your personal residence).

The provision earned the nickname “Augusta Rule” because homeowners near Augusta National Golf Club in Georgia historically rented their homes to Masters Tournament attendees for a week at extremely high rates — tax-free under §280A(g).

#How S-corp owners use the rule

The strategy works like this:

1. The S-corp needs to hold board meetings, strategy sessions, planning retreats, training events, or other legitimate business gatherings.
2. The corporation rents the owner’s home (or a portion of it) for one or more days at a comparable rental rate.
3. The corporation deducts the rent as an ordinary business expense (typically classified as “Rent or lease” on Form 1120-S).
4. The owner receives the rent income personally.
5. Because the total rental days for the year are 14 or fewer, the owner excludes the income under §280A(g) — tax-free.
6. The corporation issues Form 1099-MISC (Box 1, Rents) to the owner.
7. The owner reports the income on Schedule E with the §280A(g) exclusion, resulting in zero taxable rental income.

The net effect: the corporation gets a tax deduction (reducing K-1 income to the owner), and the owner receives tax-free cash. Pure SE-tax-free, income-tax-free transfer.

#The dollar math

For an S-corp owner in the 32% federal bracket with $300K of K-1 income, using the Augusta Rule for 10 days of business meetings at $1,500/day rental rate:

• Total rental: $15,000
• Corporation’s federal tax savings: $15,000 × 32% (assumes no QBI phase-out impact) = $4,800 of federal income tax saved
• Self-employment / payroll tax savings: $0 (rent isn’t subject to SE tax in either direction)
• Owner’s personal federal tax on rental income: $0 (tax-free under §280A(g))
• Net annual tax savings: $4,800

Plus, the $15,000 of cash moved from the corp to the owner doesn’t carry the FICA or income tax cost that a salary or bonus would. The full $15K reaches the owner tax-free.

Over a 10-year career, properly using the Augusta Rule produces $40K–$80K of accumulated federal tax savings — meaningful, but only if the strategy is implemented with the documentation discipline outlined below.

#The four pillars of Augusta Rule defensibility

#Pillar 1 — Genuine business purpose

The rental must be for an actual business purpose. The IRS scrutinizes Augusta Rule positions where the “business meeting” was clearly invented to justify the rental.

Legitimate business purposes:

• Annual board of directors meetings
• Strategic planning retreats with the owner and key advisors
• Owner-employee training or planning sessions
• Client appreciation events with documented invitations and attendance
• Vendor or partnership meetings
• Annual corporate compliance meetings (required for some entity types)
• Executive offsites for planning, review, or training

Questionable purposes:

• Solo “meetings” where only the owner participates (no other attendees, no agenda)
• Family gatherings disguised as business events
• “Meetings” with no agenda, no minutes, and no business outcome
• Routine work that could have been done from a regular office

For solo S-corp owners with no other employees, the strongest documentation involves outside attendees (advisors, partners, customers) who can corroborate the business purpose. Pure-solo Augusta Rule events can work but require extra diligence on agenda and documentation.

#Pillar 2 — Fair market rental rate

The rent must reflect what an unrelated party would pay for similar space for similar use. The IRS will challenge inflated rates — particularly rates 2–5× the comparable market.

How to document fair rate:

• Pull comparable hourly or daily rates for nearby event venues, conference rooms, executive office spaces, or short-term rentals
• For a residential setting, look at:
  • Hotel meeting space rates (Marriott, Hyatt, Hilton meeting rooms in your area)
  • WeWork or Regus daily conference room rates
  • Airbnb / VRBO short-term rentals of comparable homes
  • Event venue rentals (banquet halls, country clubs, etc.)
• Compile a “comparable rate analysis” document showing 3–5 comparable rentals, the rates, and your chosen rate falling within that range
• Update the analysis annually

A 4-bedroom home in a Texas suburb suitable for an 8-person executive retreat might support a daily rate of $800–$2,500 depending on amenities (pool, lake access, large dining/meeting space). Documenting the rate with comparables is what defends the position at audit.

Red flags:

• $10,000/day for a typical suburban home
• Rates that conveniently match the corporation’s tax-deduction target
• No comparable rate analysis documented contemporaneously

#Pillar 3 — Proper documentation

For each Augusta Rule rental day, maintain contemporaneous documentation:

• Written rental agreement between the corporation and the owner-as-landlord (signed before the rental)
• Agenda for the business event held that day
• Attendees (names, titles, companies if outside attendees)
• Meeting minutes or summary capturing topics discussed and decisions made
• Invoice from the owner to the corporation for the day’s rent
• Payment record showing the corporation paid the rent
• Photos of the meeting setup (optional but helpful at audit)

For a typical 10-day Augusta Rule year, this is roughly 30–60 minutes of administrative time across all events. Critical: the documentation must be contemporaneous, not retroactive. Reconstructing minutes after the fact is a common audit failure.

#Pillar 4 — Tax reporting integrity

The 1099-MISC must be issued by the corporation to the owner. The owner must report the income on Schedule E with the §280A(g) exclusion explicitly claimed. Skipping the 1099 or reporting the rent in the wrong place creates IRS information-matching issues.

The Schedule E treatment looks like this:

• Property identified (the personal residence)
• Days rented: 14 or fewer
• Days of personal use: 351+ (rest of the year)
• Rental income reported (the $15K from the corporation)
• Expenses: zero (per §280A(g), no expenses allowed)
• Net rental income: $15K reported
• §280A(g) exclusion claimed: $15K (often as “Other expenses” with explanation, or as a footnote, depending on how your preparer handles it)
• Net taxable rental income: $0

Different preparers handle the §280A(g) exclusion mechanics differently — some use a Schedule E footnote, some net the exclusion against rental income, some report on Form 8582 with adjustment. The substantive result is the same: zero taxable rental income.

#The 14-day ceiling — strict, no exceptions

The rule is strict: 14 days or fewer.

#Common implementation patterns

For most ETS clients using the strategy, the annual pattern looks like:

Quarterly board meetings (4 days/yr): The owner-as-sole-director holds quarterly board meetings at home, lasting most of a day. Agenda covers corporate decisions, strategy review, compliance items. Rate: $1,200–$2,000/day.

Annual strategic planning retreat (2 days/yr): Two-day offsite at the owner’s home with key advisors (CPA, attorney, business coach). Reviews prior-year results, sets next-year plan. Rate: $1,500–$2,500/day.

Quarterly training or planning sessions (4 days/yr): Half-day or full-day sessions with owner and any key contractors or employees, focusing on specific projects, training, or operational reviews. Rate: $800–$1,500/day.

Total: 10 days × average $1,500/day = $15,000/yr of Augusta Rule income

The pattern can flex by client. Larger businesses with more advisors and more decision events use more days. Smaller solo S-corps may use only 4–6 days/yr.

#What kills the position at audit

In our cleanup work and conversations with practitioners who’ve defended Augusta Rule audits, the common failure patterns:

1. Rate inflation. $5,000–$10,000/day for a suburban home with no comparable support. The IRS rebenchmarks to comparable rates ($800–$2,500) and disallows the excess deduction. Owner gets stuck with the full corp deduction reduction.

2. Sham meetings. “Meetings” with no agenda, no attendees, no minutes, no business outcome. IRS recharacterizes the payments as disguised distributions, costing the corporation the deduction and potentially recharacterizing the income at the owner level.

3. Same-day mixed personal/business use. Owner uses the home for a family birthday party in the morning and a “board meeting” in the afternoon. Hard to distinguish business use from personal use; IRS often disallows.

4. 15+ days of rental. Loses the entire §280A(g) exclusion. Full rental income becomes taxable.

5. No 1099 issued. The corporation deducts the rent but doesn’t issue a 1099 to the owner. The owner doesn’t report the rent on Schedule E. IRS information-matching catches the gap.

6. Inconsistent treatment year over year. Some years rent at $500/day, other years at $2,500/day for similar use. Inconsistency raises questions about whether either rate is actually fair market.

7. Comingling with home office deduction. Owner takes both Augusta Rule rentals AND home office accountable plan reimbursements without coordinating. Generally workable but needs clean accounting to avoid double-deduction issues.

#Coordination with home office accountable plan

Most S-corp owners we work with use BOTH the Augusta Rule (14-day full-home rental) AND a home office accountable plan (regular monthly reimbursement for the dedicated office space). The two don’t conflict if structured properly:

• Home office accountable plan: Reimburses the business-use portion of the home (typically 8–18% of total square footage) for routine office activity year-round.
• Augusta Rule: Rents the entire home (or a substantially larger portion) for specific business events on 14 days or fewer per year.

The two compensate for different uses on different days. On Augusta Rule rental days, the home office reimbursement for that day should be excluded (don’t double-count). The accountable plan covers 351+ days; the Augusta Rule covers up to 14. Total deduction is the sum, properly allocated.

#Common questions

Can I use the Augusta Rule for any 14 days, or do they have to be specific business days? The 14 days must be days the home is “rented” for a bona fide rental purpose. For S-corp use, the rental purpose is the corporate business event. So each rental day must align with an actual business event.

Can I rent my vacation home or second home to my S-corp? Yes, as long as the property qualifies as a “dwelling unit” (it does for most homes and apartments) and your personal use exceeds the rental period (which it will if rental is ≤14 days/yr). The Augusta Rule applies to your residence as defined under §280A.

What if my home isn’t well-suited for business meetings? Then the comparable rate analysis will likely support only modest rates, and the strategy may not produce meaningful savings. Augusta Rule works best when the home has space, amenities, and atmosphere that justify daily rental rates above $800/day.

Can I rent the home for half-days at half the rate? Yes, but each calendar day counts as one day regardless of how many hours the rental covers. A half-day rental still uses one of your 14 days. Many practitioners pro-rate the rate (half day = half day’s rate); others apply full day rate for any partial-day rental.

Does the Augusta Rule work for partnerships and sole proprietorships? For partnerships, yes — the same mechanics apply if the partnership rents the partner’s residence for business purposes. For sole proprietorships, the rule doesn’t work because there’s no separate entity to pay rent — the sole prop and the individual are the same taxpayer.

Can I structure regular weekly meetings as Augusta Rule rentals? Risky. Weekly use looks like regular business use of the home, not the occasional event-rental pattern the rule was designed for. The IRS may recharacterize regular use as creating a different relationship (home office, regular rental) outside §280A(g) protection. Use the Augusta Rule for genuinely occasional events.

What about renting the home for clients or customers, not for internal corporate use? Same mechanics — the rental is to the corporation, which then uses the space to host clients. As long as the corporation pays the rent at fair market and uses the space for a bona fide business purpose (client event, training session), it works.

Do I need to report the rental income if it’s tax-free? Yes — report on Schedule E with the §280A(g) exclusion. The reporting documents the position and matches the 1099 issued by the corporation. Skipping the reporting creates IRS information-matching mismatches.

Can my spouse hold the Augusta Rule meetings if she’s an officer or employee? The rental income belongs to the homeowner. If the home is jointly owned (community property or joint tenancy), the income is split between spouses. The corporation still gets the deduction; the income reporting is just split. This doesn’t increase the 14-day limit — it’s per dwelling unit, not per owner.

What’s the audit profile of Augusta Rule positions? The position is well-documented and broadly accepted, but inflated rates and sham meetings draw scrutiny. Owners using the rule with comparable-rate documentation, genuine meetings, and contemporaneous minutes generally survive audit. Owners using the rule aggressively without documentation regularly lose.

Can I increase my Augusta Rule rate over time as my home appreciates? Yes, if comparable rates support the increase. Annual re-benchmarking of comparable rates accommodates market changes. Increases that outpace comparable market changes are harder to defend.

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If you’ve been hearing about the Augusta Rule from podcasts and TikTok but haven’t implemented it with the documentation discipline that holds up at audit, the Discovery call is where we get it right. We document the comparable rates, draft the rental agreements, structure the business event calendar, and coordinate with your home office accountable plan. We don’t do surprises — you’ll see the defensible rate and the meeting cadence before we cut a single check. Free advice either way.