The Augusta rule is the nickname for Section 280A(g) of the Internal Revenue Code: if you rent out a home you live in for fewer than 15 days in a year, you do not report the rent as income and you do not deduct any rental expenses. Owners of an S corporation, C corporation or partnership sometimes rent their home to their own company for board or planning meetings, so the company deducts a fair rent and the owner receives it tax free. It works only with a real meeting, a fair rate and a paper trail.
Key takeaways
- Under IRC 280A(g), rent from a home you use as a residence is excluded from income if the home is rented for fewer than 15 days in the year, and no rental deductions are allowed.
- The business side is a separate question: your company deducts the rent only if it is ordinary, necessary and reasonable under Section 162.
- It does nothing for a sole proprietor or single-member LLC on Schedule C, because you cannot pay rent to yourself.
- In Sinopoli v. Commissioner (T.C. Memo. 2023-105) and Jadhav v. Commissioner (T.C. Memo. 2023-140), unsupported rates and missing meeting records cost the taxpayers most or all of the deduction.
- Keep rate comparables, minutes, attendee lists, a written agreement, an invoice and proof of payment.
What does Section 280A(g) actually say?
Section 280A(g) applies when a dwelling unit is used by the taxpayer as a residence during the year and is actually rented for less than 15 days during that year. In that case, no deduction from the rental use is allowed, and the rental income is not included in gross income. IRS Publication 527 says the same: do not include the rent in income, and the expenses are not rental expenses.
Two details matter. First, the home has to be used as a residence, which Section 280A(d)(1) defines as personal use for more than the greater of 14 days or 10% of the days it is rented at a fair rental. Your primary home easily meets that. Second, the 15-day count is for the whole year and every renter. If you rent the same home to your company for 10 days and list it on a vacation rental site for another 10, the exclusion is gone.
Why is it called the Augusta rule?
The nickname comes from Augusta, Georgia, home of the Masters golf tournament. Residents there have long rented their houses to visitors for tournament week, and the 14-day exclusion is widely said to have been written with them in mind. The statute never uses the name; you will also see it called the Masters rule or the 14-day rule.
How does the Augusta rule work with your own S corp, C corp or partnership?
The planning version has two halves that are tested under different rules. Your company rents your home for a real business event, such as a quarterly board meeting, an annual planning session or an all-hands strategy day. The company deducts the rent as a business expense under Section 162, which allows ordinary and necessary expenses and, for rent, requires the amount to be reasonable. You, as the homeowner, exclude the rent from your income under Section 280A(g) as long as the home was rented fewer than 15 days that year.
Because the two halves are separate, passing one does not prove the other. Sinopoli shows this clearly: the court’s analysis focused on the company’s deduction, which it cut to what the facts supported.
| Business structure | Can the Augusta rule help? | Why |
|---|---|---|
| S corporation | Yes, if supported | The corporation is a separate taxpayer that can deduct reasonable rent paid to its shareholder. |
| C corporation | Yes, if supported | Same logic; rent above fair value risks being treated as something else, such as a disguised dividend. |
| Partnership or multi-member LLC | Yes, if supported | The partnership can deduct reasonable rent paid to a partner for use of the partner’s home. |
| Sole proprietor or single-member LLC on Schedule C | No | The business and the owner are the same taxpayer, so there is no one to pay rent to. |
Why doesn’t it help a sole proprietor or single-member LLC?
The IRS treats a single-member LLC that has not elected corporate status as disregarded: its income and deductions go on the owner’s own return, on Schedule C for an individual owner. Moving money from the business account to your personal account is not a rent payment to another taxpayer. If you work from home as a sole proprietor, the tool to look at is the regular home office deduction, not the Augusta rule.
What support do you need for an Augusta rule rental?
Treat it like any related-party transaction an IRS agent will read closely, and build the file before the first meeting.
- Fair market rent support. Quotes or listings for comparable local meeting space (a hotel conference room, coworking board room or event space of similar size and for the same length of time), saved with dates. An independent appraisal is stronger still.
- A real business purpose. A board meeting, shareholder meeting, budget session or team planning day that the company would otherwise hold somewhere else.
- Agenda, minutes and attendee list. Written at the time, showing what was discussed and decided and who attended in a business role.
- A written rental agreement. Dates, the space used, the rate and how it was set.
- An invoice from the owner to the company for each rental.
- Payment from the business bank account to the owner, not cash or a transfer labeled as a draw.
- A day count. A log showing the home was rented fewer than 15 days in total for the year.
On information returns: rent paid in the course of a business is generally reported in box 1 of Form 1099-MISC, and for payments made in 2026 the threshold is $2,000, per the IRS instructions for Forms 1099-MISC and 1099-NEC. Whether a 1099-MISC should be issued for rent the owner will exclude under 280A(g), and how it is then shown on the owner’s return, is a call to make with your tax CPA before year end. Our 1099 prep guide covers the mechanics.
What went wrong in the Tax Court cases?
Sinopoli v. Commissioner, T.C. Memo. 2023-105
In Sinopoli (filed August 14, 2023), three owners of an S corporation that operated Planet Fitness franchise locations had the company pay them rent for meetings held at their homes in 2015 through 2017. The company deducted $96,400, $113,500 and $81,000 of rent for those years, and the owners excluded the payments under 280A(g). The rates were based on one owner’s research of meeting-space prices per square foot, with no appraisal.
The court found the owners did not prove the three meetings a month they claimed, writing that they “have not presented any written documentation such as minutes, agendas, or calendars.” Attendees were generally just the owners, and the court observed that “only small portions of the residences were used for the meetings.” The IRS had allowed $500 per substantiated meeting based on local meeting-space rates, and the court called $500 a month “actually generous.” It allowed $6,000 for 2015 and left the IRS allowances of $6,000 and $4,500 for 2016 and 2017 in place. The court also agreed with the IRS that “it seems that petitioners adopted a tax savings scheme to distribute Planet’s earnings to petitioners.”
Jadhav v. Commissioner, T.C. Memo. 2023-140
In Jadhav (November 21, 2023), an S corporation rented each of the owners’ four homes for 14 days a year at $2,000 to $2,500 per day, rates taken from a tax plan sold by a planning firm rather than from local comparables or an appraisal. The company had invoices, but nothing showing the rates were what an unrelated party would pay. The court concluded the payments were “unreasonable and something other than rent,” noting that “only the portion of an expense that is reasonable qualifies for deduction under section 162(a),” and denied the rent deductions, as summarized by TaxProf Blog.
What is aggressive, and what does the IRS commonly disallow?
These are the patterns that lose:
- Inflated rent. Pricing a living room meeting at the rate for a whole luxury home or a large event venue. The comparable is meeting space of the size you actually use.
- No real meetings. Fourteen calendar entries with no agenda, no minutes and no decisions.
- Family gatherings. A holiday party, birthday or family weekend relabeled as a company meeting.
- Owner-only meetings with a large rent bill, especially when the “meeting” is two spouses at the kitchen table.
- Rates copied from a promoter’s template instead of local evidence, as in Jadhav.
How does it interact with the home office deduction?
A home office deduction requires a specific area used regularly and exclusively for business, as Publication 587 explains. That space is already business space. If your company reimburses you for a home office under an accountable plan, do not also charge Augusta rent for the same room, or the company pays twice for one space. Augusta rentals usually cover the shared living areas used for a meeting, which by definition are not exclusive-use space. Section 280A(c)(6) also limits deductions when an employee rents part of a home to their own employer, so have your tax CPA map out which space is covered by what.
How should you record an Augusta rule rental in the books?
Whether your company runs on QuickBooks Online, Xero, NetSuite, Sage Intacct or an AI-native platform such as Rillet or Digits, the steps are the same:
- Set up the owner as a vendor with a W-9 on file, separate from their payroll record.
- Use a dedicated expense account, such as “Rent, meeting space (related party),” so these payments never mix with office rent, home office reimbursements or owner distributions.
- Enter a bill for each rental dated the meeting day, and attach the invoice, agreement, agenda, minutes, attendee list and rate comparables to the transaction.
- Pay the bill from the business bank account and match it in the bank reconciliation.
- Review at year end that the total days are under 15 and flag the vendor for your tax CPA’s 1099 decision.
Because the rent lowers the company’s profit, it can change what an S corp or partnership owner pays in quarterly estimates. Run the new numbers through our estimated tax calculator. If you want related-party items like this handled cleanly each month, that is part of our outsourced bookkeeping work, and we coordinate with your tax CPA, who decides how it is reported.
Frequently asked questions
Is the Augusta rule legal?
Yes. Section 280A(g) is part of the Internal Revenue Code, and excluding rent from a home rented fewer than 15 days a year is a legitimate result. What gets challenged is the business deduction on the other side, when the meetings or the rate cannot be supported.
Is the Augusta rule 14 days or 15 days?
Both phrasings describe the same limit. The statute says the home must be rented for less than 15 days during the year, so 14 days is the maximum. At 15 days or more, the exclusion no longer applies.
Do the 14 days have to be in a row?
No. Section 280A(g) counts the days the home is actually rented during the taxable year, not a consecutive block. Twelve monthly meetings of one day each count as 12 days.
Can a single-member LLC use the Augusta rule?
Not if it is taxed as a disregarded entity on Schedule C. The LLC and the owner are the same taxpayer for income tax, so a payment from one to the other is not rent. A single-member LLC that has elected S corporation status is a separate taxpayer and is in a different position.
How do I figure a fair rental rate for my home?
Gather prices for comparable local meeting space of a similar size and duration, such as hotel meeting rooms or coworking board rooms, and keep the quotes or screenshots with dates. An independent appraisal is stronger evidence. Rates from a planning firm’s template were not enough in Jadhav.
Does my business need to issue me a 1099 for Augusta rule rent?
Rent paid in the course of a business is generally reportable in box 1 of Form 1099-MISC, with a $2,000 threshold for payments made in 2026. How that interacts with an exclusion under 280A(g) is a reporting decision for your tax CPA, so raise it before January.
Can I use the Augusta rule for a family party or holiday gathering?
No. The company’s deduction requires an ordinary and necessary business expense, and a personal or family event is neither. Relabeling family gatherings as meetings is one of the patterns most likely to be disallowed.
Can I use the Augusta rule and also take a home office deduction?
They cover different things. A home office is space used regularly and exclusively for business, while an Augusta rental is short-term use of residential space for a meeting. Do not charge rent for the same space and days your company already reimburses as a home office.
Does the Augusta rule apply to a vacation home?
It can apply to any dwelling unit you use as a residence under Section 280A(d), which means personal use of more than the greater of 14 days or 10% of the days it is rented at a fair rental. The fewer-than-15-days limit counts all rentals of that home, including vacation rental bookings.
What happened in Sinopoli v. Commissioner?
In T.C. Memo. 2023-105, an S corporation deducted $96,400 to $113,500 a year in rent for meetings at its owners’ homes. With no minutes, agendas, calendars or appraisal, the Tax Court allowed only $500 per substantiated meeting, a small fraction of what was claimed.
Who reports the rental income under the Augusta rule?
Under Section 280A(g), the homeowner does not include the rent in gross income if the home was rented fewer than 15 days that year, and IRS Publication 527 confirms the rent is not reported as income. The company records the payment as a rent expense in its books.
Can a C corporation use the Augusta rule?
Yes, the same two tests apply: the corporation deducts rent only if it is ordinary, necessary and reasonable, and the shareholder excludes it under 280A(g). Rent above fair value is at risk: in Jadhav, an S corporation case, the Tax Court found the payments were “something other than rent.”
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