Augusta Rule (§280A)
The Augusta Rule may allow a business to pay the owner for legitimate use of a personal residence for up to 14 days a year, with proper documentation and fair-market support. The benefit is the income reduction times your marginal rate — not a flat figure.
At a glance
- Category
- Business Owner
- May be relevant for
- Business owners who host meetings at home
- Our approach
- Document review → proposal → implementation
- Service area
- Nationwide (office in Westlake Village, CA)
Whether this applies to you depends on your specific facts and circumstances.
Ask a CPA about your situationImportant: This page is for educational purposes only. It describes how this strategy may work under current law. Whether it is appropriate for you, and how to implement it correctly, depends entirely on your specific facts, timing, and documentation. This is not individualized tax advice. Speak with a licensed CPA before acting.
How it may work
Augusta Rule (§280A) — a plain-English overview
The sections below describe how this strategy works under current tax law, what conditions may make it applicable, and what factors affect the outcome.
The underlying Code provision
§280A(g) of the Internal Revenue Code provides that if a taxpayer rents a personal residence for fewer than 15 days during a taxable year, that rental income is excluded from gross income and the renter-business may deduct the payment as an ordinary and necessary business expense. The provision is symmetric: the owner excludes the income, and the business deducts the expense — both outcomes require that the arrangement be legitimate.
What 'legitimate' requires
The IRS and Tax Court have scrutinized §280A(g) arrangements. Key requirements: (1) the use must be for a genuine business purpose — meetings, workshops, board sessions, or similar documented business activities; (2) the rental rate must be at or below fair market value — what a comparable venue in your area would charge for the same space and the same use; (3) the days must be separately and contemporaneously documented — an agenda, attendee list, and description of business activity; and (4) the payment must actually flow from the business to the owner and be properly recorded in the entity's books. The name 'Augusta Rule' comes from the long-standing practice of homeowners renting to Masters Tournament visitors — but the IRS has issued guidance (most notably in the Moritz case line) making clear that a fictional rental with no real business purpose will be disallowed.
What the benefit may look like — in general terms
The potential value is the tax on the income reduction multiplied by your marginal rate — federal and state combined. Because the income excluded is ordinary income to the owner and the deduction reduces pass-through income at the entity level, the effective benefit depends on your specific rate. There is no universal dollar figure. A thorough analysis requires knowing your actual rate and the defensible rental amount for your specific property and location.
Why this is heavily fact-dependent
Courts have invalidated §280A(g) arrangements where the business purpose was unclear, where the rental rate was not supportable by comparable market data, or where documentation was prepared after-the-fact rather than contemporaneously. This strategy requires discipline: real meetings, real agendas, real payments, and real comparable rental data from the time of use — not reconstructed at year-end.
Document-first
What we'd review before recommending this strategy
We do not guess. We review the documents, propose, and implement. Here is what we'd want to see to evaluate whether this strategy may apply to you.
- Entity type — the paying entity must be a legitimate business with a genuine need for meeting space
- Business purpose — meeting agendas, attendee lists, and documentation of activities at the home
- Comparable venue data — what similar spaces in your area rent for, at the time of use
- Number of qualifying days — must remain below 15 per year for the exclusion to apply
- Actual payment records — the payment must be made, recorded in the entity's books, and reflected on Schedule E
- Prior use of the provision — whether this has been done before and how it was reported
Who this may fit
Profiles where this strategy comes up most
These are the client situations where we most commonly evaluate this strategy. Whether it applies to you depends on your specific facts.
Common Questions
Questions about Augusta Rule (§280A)
Educational answers to questions we often hear when discussing this strategy with clients.
Does the business deduct the full rental amount?
The business deducts the rental payment as an ordinary and necessary business expense, subject to the same requirements as any other deductible business expense — it must be reasonable in amount, have a genuine business purpose, and be properly substantiated. The owner excludes up to 14 days of rental income from personal gross income.
What happens if we use the home for 15 or more days?
If the dwelling unit is rented for 15 or more days during the year, §280A(g) no longer applies. The rental income becomes taxable, and the deductibility of expenses is governed by §280A(c) and §469. The 14-day limit is a hard line.
Is this the same as the home office deduction?
No. They are separate provisions with separate requirements. The home office deduction under §280A(c) applies to a portion of the home used regularly and exclusively for business. The §280A(g) rental exclusion applies to short-term rental of the entire residence (or a portion) for legitimate business purposes. Both can apply to the same taxpayer, but they operate independently.
Educational content only
This page describes Augusta Rule (§280A) for general educational purposes under current tax law. It is not individualized tax, legal, or investment advice. Whether this strategy is appropriate for you — and how it should be structured, documented, and reported — depends entirely on your specific facts, timing, and circumstances. Tax law changes frequently. Always consult a licensed CPA before acting on any information here.
We do not guess. We review the documents, propose, and implement.
Ask a CPA
Wondering if Augusta Rule (§280A) applies to you?
Tell us about your situation and we'll follow up within one business day. We review the actual documents and give you a direct answer — no obligation.
- Document-first review — we start with your actual returns and records
- Clear explanation of what may apply and why
- No obligation — honest if there isn't enough value to act on
Explore more
Other Business Owner strategies
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Profitable business owners
Electing S-corporation status may reduce self-employment tax for owners with consistent profit, when paired with a reasonable salary. Whether it helps depends on profit level, payroll cost, and state treatment.
Reasonable Compensation
S-corp owners
S-corp owners must pay themselves reasonable wages. Setting compensation defensibly is where S-corp planning is won or lost — too low invites scrutiny, too high gives back the benefit.
Accountable Plan
Owners with home-office and mixed-use expenses
An accountable plan can let a business reimburse owners and employees for legitimate business expenses — home office, mileage, and more — in a documented, compliant way.
Ready to find out what applies to your situation?
A discovery call is how we start. We review the documents and tell you honestly what may be worth pursuing.