The Augusta Rule (IRS §280A): Tax-Free Rental Income Up to 14 Days

TL;DR. Internal Revenue Code §280A(g) — the "Augusta Rule" — excludes rental income from gross income when a dwelling unit you use as a residence is actually rented for fewer than 15 days during the tax year. It also disallows any deductions attributable to that rental use. Renting to your own business is a separate question: the entity's deduction stands or falls under §162, which requires a genuine business purpose, a reasonable rate and real substantiation. Neither test guarantees the other, and the dollar outcome depends entirely on your own facts.

Where the rule comes from

Section 280A of the Internal Revenue Code generally restricts deductions on dwelling units used for both personal and rental purposes. Buried in subsection (g) is a simple, generous exception:

"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, then... no deduction otherwise allowable... shall be allowed... and the income derived from such use shall not be included in the gross income of such taxpayer."

The provision earned its nickname from homeowners around Augusta National Golf Club who rent their houses for tens of thousands of dollars during The Masters each April. The same statute applies to a homeowner near a Super Bowl, a Formula 1 race, a college graduation weekend — or, most usefully, to a business owner renting to their own company.

The business-owner play, step by step

Step 1 — Confirm the property qualifies

The home must be a dwelling unit — a house, condo, or even a houseboat — that you use as a residence: your main home always qualifies; a vacation home qualifies only if you use it personally more than 14 days (or more than 10% of its rented days, if that is larger). Count every day it is rented to anyone (Airbnb/VRBO guests plus your business). If the total reaches 15, §280A(g) doesn't apply for that year, and the rent is reported on Schedule E under the normal rules.

Step 2 — Establish fair market value

This is where the IRS spends its audit attention. In Sinopoli v. Commissioner, T.C. Memo. 2023-105, the Tax Court allowed roughly $500 per meeting rather than the far larger amounts claimed, disallowed the excess as neither reasonable nor substantiated, and sustained accuracy-related penalties. The lesson is not that the strategy fails — it is that the entity's deduction rises and falls on §162 evidence.

Pull written quotes from local venues — three is a good practice:

• A hotel meeting room or conference suite of comparable size
• A coworking space's largest private meeting room
• A dedicated event venue (think Peerspace, Splacer, or local equivalents)

Save the quotes as PDFs in your tax file. Pick a rate inside the range — not above the highest quote. If your home offers genuine extras (catered food, AV equipment, parking for 20), you can defensibly land at the top of the range.

Step 3 — Hold real meetings

The meeting must have a legitimate business purpose. Quarterly board meetings, annual strategy offsites, employee training days, client presentations, and shareholder meetings all qualify. A "meeting" with yourself in your home office while you do regular work does not.

Step 4 — Document obsessively

For each rental day keep:

• Written rental agreement signed by both parties
• Meeting minutes: date, attendees, agenda, decisions made
• Invoice from the homeowner to the business
• Proof of payment by check or ACH
• Photos of the space set up for the meeting (not required but helpful)

How much can you actually save?

Common mistakes

• Reaching 15 rented days. §280A(g) applies only when the residence is actually rented for fewer than 15 days in the tax year. At 15, the subsection does not apply for that year at all.
• No comparables. Without documented FMV, the IRS will substitute its own number — usually a fraction of yours.
• Sham meetings. "We sat in the kitchen and talked about the business" is not a meeting. Have a real agenda.
• Cash payment. Cash is legal, but it leaves the weakest record of what was paid. Pay by check or ACH from the business account so the payment is easy to prove.
• Confusing the two tests. Rent excluded from the owner's income under §280A(g) is not automatically deductible by the payer. The entity needs its own §162 case — and it still issues Form 1099-MISC for rent at or above the reporting threshold; §280A(g) excludes the income, it does not waive information reporting.

Bottom line

The exclusion in §280A(g) is mechanical: fewer than 15 rented days and the income stays out of gross income. The contested half is always the payer's §162 deduction, and Sinopoli shows what happens when the rate and the business purpose are not documented — a partial disallowance plus accuracy-related penalties. The benefit depends on your own rate, days and marginal bracket, so run the numbers on your facts rather than assuming a range.