If you own a home and also operate a business, there is a powerful and completely legal tax strategy that many small business owners overlook.

It’s commonly called the “Augusta Rule.”

And it comes directly from Internal Revenue Code § 280A(g).

If structured properly, this rule allows you to:

• Rent your home to your own business
• Deduct the rental expense at the business level
• Receive the rental income personally
• And pay zero federal income tax on that rental income

Yes — zero.

Let’s walk through how it works.

Where the Rule Comes From: IRC § 280A(g)

The rule originates in:

26 U.S.C. § 280A(g)

The statute states:

“Notwithstanding any other provision of this section… if a dwelling unit is used during the taxable year by the taxpayer as a residence and is rented for less than 15 days during the taxable year, then —
(1) no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and
(2) the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer.”

Let’s translate that into plain English:

If you rent your personal residence for fewer than 15 days during the year,
then:

• You do not report the rental income, and
• You also do not deduct rental expenses.

The income simply does not get included in gross income.

Why It’s Called the “Augusta Rule”

The nickname comes from homeowners in Augusta who rent their homes during the Masters Tournament.

They often charge substantial daily rental rates for a week — but because they rent for fewer than 15 days per year, the income is excluded from taxation under § 280A(g).

Congress intentionally created this exception.

How Business Owners Use the Augusta Rule

Here’s where it gets interesting.

If you own:

• An S-Corporation
• An LLC taxed as an S-Corp
• A C-Corporation
• Or even a sole proprietorship (with more caution)

Your business can rent your home for:

• Annual shareholder meetings
• Board meetings
• Strategic planning sessions
• Training events
• Client presentations

The business pays a fair market rental rate for the use of your home.

The business deducts the rental payment as an ordinary and necessary business expense under:

26 U.S.C. § 162(a)
(“There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.”)

Meanwhile:

• You personally receive the rental income
• If total rental days are fewer than 15
• You exclude that income under § 280A(g)

That is a powerful, congressionally authorized strategy.

What About the IRS? Is This Legitimate?

Yes — but it must be structured correctly.

The key legal requirements:

1. Fewer Than 15 Rental Days

Fourteen days maximum per calendar year.

Day 15 triggers full rental reporting rules.

2. Fair Market Value Must Be Reasonable

You cannot arbitrarily charge $25,000 per day for your dining room.

You should:

• Compare local event venue pricing
• Document similar rental rates
• Keep records of square footage used

Substance matters.

3. Real Business Purpose Required

The meeting must be legitimate.

Maintain:

• Meeting agendas
• Minutes
• Attendee lists
• Photos (optional but helpful)

If audited, documentation wins.

4. Corporate Formalities Must Be Observed

If operating an S-Corp or C-Corp:

• Payment should come from the business account
• A written rental agreement is recommended
• The corporation should approve the rental arrangement

Paper trails matter.

Tax Benefits in Real Numbers

Example:

• Business rents home for 10 days
• Fair rental value: $1,500 per day
• Total paid: $15,000

Result:

• Business deducts $15,000 under § 162
• Owner excludes $15,000 under § 280A(g)
• No payroll taxes
• No income tax on the rental

That is a legally created tax arbitrage.

When the Augusta Rule Does NOT Work

The rule does not apply if:

• You exceed 14 rental days
• You attempt to use it as a disguised distribution
• The rate is unreasonable
• There is no legitimate business activity

Also note:

If you are a sole proprietor filing Schedule C, the IRS may scrutinize the transaction more closely since you and the business are not legally separate entities.

Corporations and S-Corps tend to provide cleaner structure.

Interaction With the Home Office Deduction

Important distinction:

The Augusta Rule under § 280A(g) is separate from the home office deduction under § 280A(c).

You can potentially use both — but careful coordination is required.

This is where professional planning matters.

Why Congress Allows This

Congress carved out § 280A(g) as a simplification measure.

Instead of forcing taxpayers to:

• Track small short-term rental income
• Allocate depreciation
• Apportion utilities

Congress said:

If it’s under 15 days — ignore it.

Savvy business owners simply apply that same rule strategically.

Final Thoughts

The Augusta Rule is:

• Legal
• Codified
• Frequently misunderstood
• Powerful when properly implemented

But like all tax strategies, it must be:

• Documented
• Reasonable
• Defensible

If you operate a business and own your home, this is a strategy worth evaluating before year-end.

Done properly, it can produce legitimate, audit-defensible tax savings.

At Dino Tax Co, we help clients navigate tax matters ranging from unfiled returns to IRS letters and levies and everything in between with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call or text (713) 397-4678 or email davie@dinotaxco.com. We’re here to help you take the next step.