Does the Augusta Rule make rental income tax-free automatically?
The claim: “Rent under the Augusta Rule is automatically excluded from income with no conditions.”
Partly true — the exclusion is real, but it has conditions
Partly. IRC §280A(g) excludes rent from income when a dwelling you use as a residence is rented for fewer than 15 days in the year, and no rental deductions are allowed. When your own business pays the rent, the business may deduct it only if it meets IRC §162: real business use, a market rate, and records. A sole proprietorship cannot rent from its own owner.
Reviewed by Ebot Mbi, CPA, EA · Last reviewed · Law and figures current as of September 17, 2026
Key takeaways
- The exclusion applies only when total rental days are 14 or fewer and the home is your residence.
- Days rented to anyone count toward the limit, not only days rented to your business.
- A business deducting rent paid to its owner must show real use and a market rate.
- A Schedule C business cannot deduct rent paid to its owner, because they are the same taxpayer.
- Rent paid to you does not reduce self-employment income from a sole proprietorship.
Where the claim comes from
The nickname comes from homeowners near Augusta National who rent their homes during the Masters tournament. The rule was written for occasional rentals of a personal residence. Promoters now pitch it as a way for any business owner to move income out of the business: have the business rent your home for 14 days at a high daily rate and exclude the rent.
The exclusion itself is broad. The conditions come from the other side of the transaction, the business that deducts the rent.
Some promoters also suggest renting the home to the business for a "meeting" that is really a family holiday or a party. The IRS reviews those arrangements for the substance of the event. A gathering that would have happened anyway, attended mainly by family members, is personal regardless of the invoice.
What the law actually says
IRC §280A(g) applies "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." In that case, no deduction for the rental use is allowed, and the rental income is not included in gross income. IRS Publication 527 states that in this situation you "don't include the rent you receive in your income."
The home must be used as a residence. Under IRC §280A(d)(1), that means personal use for more than the greater of 14 days or 10% of the days it is rented at a fair rental. Most primary homes meet this easily.
Section 280A(g) does not require that the rent be at market for the homeowner to exclude it. A stranger who pays a high price during a major event pays rent that is still excluded. The market-rate requirement applies when your own business pays the rent and deducts it. IRC §162(a) allows the business to deduct only ordinary and necessary expenses, and payments to an owner that exceed what the space is worth are not rent for the excess. In Sinopoli v. Commissioner, T.C. Memo. 2023-105, the Tax Court sharply reduced an S corporation's deduction for rent paid to its owners because the rate and the business use were not adequately supported.
What is true and what is not
It is true that rent for 14 or fewer days is excluded, and that an S corporation, C corporation, or partnership can deduct rent it pays you when the use is real and the rate is supported. The combination of an entity deduction and an exclusion is legitimate when the facts support it.
It is not true that the business can set any rate, that personal gatherings count as business meetings, or that a sole proprietor can pay rent to themselves. On day 15 of rental use, the exclusion no longer applies, and the rent becomes reportable under the other §280A rules.
It is also worth noting that the exclusion is not limited to business-owner arrangements. A family that rents its home to visitors for a week during a local festival can exclude the rent under §280A(g), at whatever price the market bears, provided total rental days for the year stay under 15.
- True: rent for 14 or fewer days is excluded from income.
- True: a separate entity can deduct supported rent it pays you.
- Not true: a sole proprietorship can deduct rent paid to its owner.
- Not true: any rate your business chooses is deductible.
What to do instead
Count every rental day for the year across all renters. Hold real business events at the home, such as board meetings, planning sessions, or client or staff trainings, and keep an agenda, attendee list, and notes for each. Set the daily rate from quotes for comparable meeting space in your area, not luxury vacation listings, and keep the quotes.
Sign a written rental agreement, have the entity pay from its own account, and keep the entity's records consistent with the payment. If you claim the §199A deduction, remember that the rent lowers the business income that deduction is based on.
Keep in mind that the rent is excluded by you only because the use is short. The business still needs a real reason to meet at your home rather than at its office or a public venue, and that reason should be reflected in the meeting records.
How ebotCPA helps
We confirm whether your entity can deduct the rent, count rental days across all renters, build support for the rate, and set up the agreement and meeting records.
Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.
Assumptions: Tax year 2026; S corporation holds 14 documented meetings in the owner's home.; Comparable local meeting-space quotes support $1,000 per day.; Scenario B: the corporation pays $10,000 per day instead.; No other rental days; amounts shown are deductions and exclusions, not tax savings.
| A: rent paid (14 × $1,000) | $14,000 |
|---|---|
| A: excluded from owner's income under §280A(g) | $14,000 |
| A: corporation's supportable deduction | $14,000 |
| B: rent paid (14 × $10,000) | $140,000 |
| B: excess over supported rate at risk of disallowance | $126,000 |
At a supported rate, the $14,000 is deductible to the corporation and excluded by the owner; at ten times that rate, about $126,000 of the deduction is exposed to disallowance.
Illustration only; not a projection of your results.
Frequently asked questions
Can a sole proprietor use the Augusta Rule with their own business?
No. A Schedule C business and its owner are the same taxpayer, so there is no deductible rent. You can still exclude rent received from unrelated renters for fewer than 15 days.
What counts as a rental day?
Any day the home is rented at a fair rental, to anyone. Days rented to your business and days rented to others are added together.
Does my S corporation need to issue a Form 1099?
Information reporting depends on the facts, including the payee and the amount. Ask your tax preparer before year-end.
Can I rent my vacation home instead?
Yes, if you use it as a residence under §280A(d)(1) and the total rental days are under 15. The same business-use and rate requirements apply to the paying entity.
Have facts like these?
Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.