Short‑term rental income is typically taxable—but with Section 280A(g) of the Internal Revenue Code, also known as the Augusta Rule, you can earn up to 14 days of rental income per year tax-free. Originally designed for homeowners renting out properties during the Masters Tournament in Augusta, Georgia, this tax benefit now applies to homeowners nationwide.
The Augusta Rule presents a legitimate and powerful strategy to generate tax-exempt income—especially for business owners who can rent their homes to their own companies for meetings or events.
The Augusta Rule, named after the famous golf tournament, allows homeowners to:
No reporting on your Form 1040. No Schedule E. No tax owed—provided all conditions are met.
o legally benefit from the Augusta Rule, you must:
If you exceed the 14-day limit, the entire amount becomes taxable. The IRS expects consistency and documentation.
The IRS requires that any rent charged under this rule be reasonable and supportable. Here’s how to determine it:
Charging an inflated or unrealistic rate could result in IRS scrutiny and disqualification of the tax-free status.
To protect your deduction and avoid penalties, maintain:
Keep all documentation for at least three years. Be thorough—if audited, you’ll need to back up every detail.
If you’re a small business owner, here’s where the Augusta Rule shines:
It’s a win-win—if done properly.
To qualify:
This strategy does not apply to sole proprietors filing on Schedule C who are trying to pay themselves from their business income.
While the Augusta Rule is straightforward, these errors can cost you:
Make sure your rental days, rates, and purpose are clearly justified and properly recorded.
Case 1: The Business Owner Retreat
A tech CEO hosted quarterly planning meetings at their private home, renting it to their S Corp for 12 days total at $1,000/day (based on hotel meeting rates). The business claimed a $12,000 deduction. The owner received $12,000 tax-free.
Case 2: Real Estate Firm Board Session
A real estate LLC held two strategic planning retreats in the managing partner’s second home. Rental agreements, agendas, and payment records were maintained. The company deducted $9,000. The partner kept it all, tax-free.
Case 3: Boutique Law Practice Team Workshop
The owner rented their residence to the firm for a 2-day workshop and team-building event. The fair market rate was $750/day. With proper contracts and documentation, the $1,500 in rent was excluded from their personal income.
Strategy | Key Benefit | Limitation |
Augusta Rule | Up to 14 days of tax-free rental income | Must not exceed 14 days; no expense deductions |
Home Office Deduction | Deduct a portion of home expenses | Must meet exclusive-use and regular-use criteria |
Vacation Rental Income | Deduct related expenses | Income fully taxable if rented >14 days |
These strategies are not interchangeable—they must be carefully coordinated to avoid IRS issues.
By taking these steps, you lay the groundwork for a compliant and rewarding strategy.
While the Augusta Rule seems simple, its execution must be precise. A CPA can help you:
At A SAM LLP, we’ve been helping business owners and homeowners maximize tax efficiency for decades. Our bilingual team is fluent in both the tax code and the cultural nuances that make financial planning personal.
Partner with our bilingual CPA team for expert guidance in tax, assurance, accounting, and advisory services tailored to your business needs.
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