What is the Augusta Rule, and can my business rent my home?
Works only with a separate entity, real use, and market rent
Under IRC §280A(g), if you use a home as a residence and rent it for fewer than 15 days in a year, you leave the rent out of income and deduct no rental expenses. A separate business entity can deduct rent it pays you only if the rent is ordinary, necessary, and at fair market value. 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
- Rent for 14 days or fewer in the year; at 15 days the exclusion does not apply.
- The payer must be a separate entity, such as an S corporation, C corporation, or partnership. A Schedule C business cannot pay rent to its owner.
- The rent must match what an unrelated renter would pay for the same space and use, and the business use must be real.
- In Sinopoli v. Commissioner, T.C. Memo. 2023-105, the Tax Court disallowed most of an S corporation's home-rent deduction.
- If you claim the §199A deduction, the rent deduction lowers qualified business income and reduces the net benefit.
What it is
The "Augusta Rule" is the nickname for IRC §280A(g), a rule written for homeowners who rent their residence for a few days a year. If you use a dwelling unit as a residence and rent it for fewer than 15 days during the year, you leave the rental income out of gross income, and you cannot deduct expenses tied to that rental use.
Business owners use the rule when their company holds a meeting or event at the owner's home and pays rent for those days. The owner excludes the rent under §280A(g). The company deducts the rent only if it meets the normal business-expense rules of IRC §162.
What the law says
Section 280A(g) applies when a dwelling unit is used by the taxpayer as a residence and is actually rented for less than 15 days during the taxable year. In that case, no rental-use deduction is allowed and the rental income is not included in gross income. IRS Publication 527 states the same result: you don't include the rent in income, and the expenses are not treated as rental expenses.
Section 280A(g) says nothing about the payer. Whether the business can deduct the rent depends on IRC §162(a): the expense must be ordinary and necessary, paid in carrying on a trade or business, and reasonable in amount. Payments between related parties get close review.
Requirements and tests
Each of these must be true:
- The home is your residence under §280A(d) for the year.
- It is rented for fewer than 15 days in total for the year, counting all renters, not only your business.
- The payer is a separate entity. A sole proprietor filing Schedule C is the same taxpayer as the owner and cannot deduct rent paid to themselves.
- The business actually uses the space on each rented day, and you have records to show it: agenda, attendees, and minutes or notes.
- The daily rate matches what an unrelated renter would pay for similar space and a similar event, supported by comparable quotes for meeting space, not whole-home vacation rentals.
- There is a written rental agreement, the entity pays you from its own account, and it reports the payment consistently.
How it works
Your S corporation holds a documented quarterly planning meeting at your home, rents the space for that day at a rate backed by local meeting-venue quotes, and pays you from the company account. The company deducts the rent, which reduces the income passed through to you on Schedule K-1. You leave the rent off your return under §280A(g) if total rental days stay under 15.
The benefit is the tax on the income that moves from the K-1 to an excluded rental payment. It is not a second deduction on top of the one you already get. If you claim the qualified business income deduction under §199A, a lower K-1 amount also lowers that deduction, which reduces the net benefit.
Assumptions: Tax year 2026; married filing jointly; the S corporation is the owner's only pass-through business.; Before the rent, the couple's taxable income is $300,000, so the next $21,000 is taxed at the 24% bracket (24% applies from $211,400 to $403,550).; 14 documented meeting days at $1,500 per day, a rate assumed to be supported by local meeting-venue quotes. No other rental days.; Texas resident, so no state income tax. The §199A deduction is shown separately.
| Rent paid by the S corporation (14 × $1,500) | $21,000 |
|---|---|
| Reduction in K-1 income passed through to the owner | $21,000 |
| Income tax on $21,000 at the 24% bracket, now avoided | $5,040 |
| Rent included in the owner's income under §280A(g) | $0 |
| If the §199A deduction applies: lost deduction (20% × $21,000 = $4,200) × 24% | −$1,008 |
| Net federal income tax effect with §199A | $4,032 |
At these assumptions, federal income tax falls by about $5,040, or about $4,032 if the owner also claims the §199A deduction, but only if the rate and business use hold up on examination.
Illustration only; not a projection of your results.
Risks and IRS scrutiny
The main risks are the amount of rent and the proof of business use. In Sinopoli v. Commissioner, T.C. Memo. 2023-105, an S corporation deducted rent paid to its shareholders for meetings at their home. The Tax Court allowed only a small part of the deduction, finding that the claimed rental rate was not adequately supported.
Rates taken from luxury vacation listings, meetings with only family members, or "meetings" that are really personal gatherings invite disallowance, and accuracy-related penalties under IRC §6662 can follow. If the IRS disallows the company's deduction, how the payment you received is treated can also change.
Who it is not for
This is not for sole proprietors, who cannot rent to themselves; for anyone without real business use of the home; for anyone who rents the home for 15 or more days in the year; or for anyone who is not willing to keep the agreement, the rate support, and the meeting records. It is also not a way to shift large amounts of profit out of taxable income. The rent has to be what the space is worth for the actual use.
How ebotCPA helps
We confirm your entity can deduct the rent, count rental days across all renters, build a rate file from comparable meeting-space quotes, and set up the agreement, payment, and meeting records so the position is documented. We also calculate the net effect, including any change to your §199A deduction.
Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.
Frequently asked questions
Can a sole proprietor use the Augusta Rule?
You can exclude rent you receive from others for fewer than 15 days under §280A(g), but your own Schedule C business cannot deduct rent paid to you, because you and the business are the same taxpayer.
How much rent can my S corporation pay me?
Only what an unrelated party would pay for similar space and a similar event in your area. Base the rate on meeting-venue quotes, not luxury vacation rentals. In Sinopoli (T.C. Memo. 2023-105), the Tax Court reduced the deduction because the rate was not supported.
What happens if I rent my home for 15 days?
The §280A(g) exclusion no longer applies. The rental income is reported, and the other §280A rules decide which expenses you can deduct.
Do I need a Form 1099 or a lease?
Keep a written rental agreement and pay from the company account. Ask your tax preparer whether an information return is required for your entity and facts.
Have facts like these?
Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.