The Augusta Rule (Section 280A(g) of the tax code, named for Augusta, Georgia, where homeowners rent out their homes during the Masters golf tournament) allows you to rent your home to your business for up to 14 days a year without paying tax on the rental income. Follow these steps to ensure proper execution and compliance.

The business paying the rent must be a separate taxpayer from you. An S corporation, C corporation, or partnership (including a multi-member LLC) works. A Schedule C sole proprietorship or a single-member LLC that has not elected corporate status does not, because you and the business are the same taxpayer. For most physician clients we recommend the S election first.

If the S Corporation is already using a portion of the home for business, this does not necessarily preclude the taxpayer from taking advantage of this strategy. For example, while the S Corporation may be using one area of the home as a home office, they could rent out a completely different space in the home to the S Corporation to take advantage of the Augusta Rule. The key here is to avoid “double dipping” by taking a deduction for a home office, and for rent paid using the Augusta rule for the exact same area of the home.

Step 1: Determine Eligibility

Why: You need to ensure that both your home and business qualify for this strategy.

What to do:

  • The business paying the rent must be a separate taxpayer from you. An S corporation, C corporation, or partnership (including a multi-member LLC) works. A Schedule C sole proprietorship or a single-member LLC that has not elected corporate status does not, because you and the business are the same taxpayer. For most physician clients we recommend the S election first.
  • Ensure you own a home that can be rented to your business.

Verify that the total number of rental days does not exceed 14 days in a calendar year.

This includes all personal residence rentals, whether to your business, through Airbnb, or any other use. The IRS rule allows up to 14 rental days per year in total, regardless of who the renter is.

For example, if you rent your home on Airbnb for 7 days, you can only rent it to your business for up to 7 additional days. You can have up to 14 separate 1 day rentals, or fewer longer stays, as long as the combined total doesn’t exceed 14 days. If you go over 14 total rental days, all the rental income becomes taxable.

Step 2: Set a Reasonable Rental Rate

Why: The rental rate must reflect the fair market value to be accepted by the IRS.

What to do:

  1. Research the fair market rental value of similar properties in your area using platforms like Airbnb, VRBO, or by consulting with a local real estate agent.
  2. Search your city with similar guest count, home type, and amenities
  3. Average 3–5 similar listings
  4. Adjust down if you’re not offering full-service (e.g., no cleaning, no overnight stay)
  5. Document your research to justify the rental rate in case of an audit.

Grab Your Augusta Rule Reasonable Rent Calculation Template

✓ Google Sheets version (makes a copy to your Drive)

✓ Excel version (downloads to your computer)

Step 3: Create a Rental Agreement

Why: A formal rental agreement ensures legal and tax compliance.

What to do:

  • Draft a formal rental agreement between yourself (the homeowner) and your business.

Include details like:

  • Rental dates
  • Rental rate
  • Purpose of the rental
  • Other relevant terms

Click to download Rental Agreement Template

Step 4: Document the Business Use

Why: Documenting the business purpose for each rental period is essential for IRS compliance.

What to do:

  • Clearly document the business purpose for each rental period (e.g., meetings, strategy sessions, company retreats).
  • In order to take a deduction for the business, you must be able to demonstrate that a business meeting or event took place and that the expense was both ordinary and necessary. “Ordinary and necessary” is the IRS standard, and courts have interpreted “necessary” to mean appropriate and helpful to your business not necessarily essential or indispensable.
  • Examples of qualifying business activities include strategy sessions, prospect or client meetings, and administrative planning days.
  • Keep detailed records, including:
    • Agendas
    • Attendee lists
    • Minutes of meetings

Click to download Meeting Minutes Template Document

Step 5: Invoice the Business

Why: Proper invoicing formalizes the rental transaction and ensures transparency.

What to do:

  • Issue an invoice from yourself (the homeowner) to your business, aligning with the rental agreement.

The fair market rental rate you documented

Here is a template you may download and use: Invoice Template

Step 6: Payment

Why: Ensure the payment follows formal processes for proper documentation.

What to do:

  • Have your business pay the invoice from the business bank account, and deposit the payment into your personal bank account. Keep a copy of the transfer record or canceled check.

Step 7: Expense Deduction for the Business

Why: Your business can deduct the rental expense, reducing taxable income.

What to do:

  • The business should deduct the rental expense as a business expense.

Make sure the expense is properly categorized in the business’s financial records.

Step 8: Report and Document

What to do:

  • Do not report the rental income on your personal tax return if the rental period does not exceed 14 days in a calendar year.
  • Maintain all documentation, including:
    • The rental agreement
    • Invoices
    • Payment records
    • Meeting minutes
    • Your evidence of the fair market rental rate

Key Considerations

Valid Business Purpose: The business must have a justifiable business reason to rent the space from you.

Reasonableness: Ensure the rental rate is reasonable and reflects the fair market value to withstand IRS scrutiny.

Documentation: Proper documentation is crucial to substantiate the business purpose and the rental rate.

Compliance: Ensure compliance with local and state laws regarding short-term rentals.

Tax Reporting: If the business pays you $600 or more of rent in a year, it generally issues you a Form 1099-MISC for rents. Do not worry when it arrives; when we prepare your return we report the income and back it out with a note citing Section 280A(g), so it stays tax free.