What Is the Augusta Rule and How Do Business Owners Use It?
Sam's List Editorial | 2026-07-25
What Is the Augusta Rule and How Do Business Owners Use It? The Augusta Rule lets you rent your personal home to your own business for up to 14 days a year, deduct the rent as a business expense, and receive that rent income tax-free personally. It comes from Internal Revenue Code Section 280A(g), and when it is used correctly it moves money from your business to you without either side paying income tax on it. That sounds too good, which is exactly why it draws scrutiny. The rule is real and legitimate, but it is also one of the most commonly botched tax strategies among small business owners, because the parts that make it defensible get skipped. Here is what it actually is, how business owners use it, and where it goes wrong. Where the Rule Comes From The nickname comes from Augusta, Georgia, where homeowners rent out their houses during the annual Masters golf tournament. To let them do that without a tax headache, the law allows any homeowner to rent a personal residence for 14 days or fewer per year and exclude that rental income from gross income entirely. The provision was not written specifically for business owners. It is a general rule: rent your home 14 days or less, and you do not report the income. Business owners simply noticed that if the renter is their own company, the company can deduct legitimate rent while the owner receives it tax-free. Both halves rest on the same 14-day limit. How Business Owners Actually Use It The common application is renting your home to your business for legitimate business use, most often meetings. A business genuinely needs to meet, plan, and hold sessions somewhere. If those happen at your home, the business can pay you fair rent for the space, up to 14 days a year. The mechanics matter. The business pays you rent for each qualifying day of use. The business deducts that rent as an ordinary business expense, which lowers its taxable income. You receive the payments and, because total rental use stays at 14 days or fewer for the year, you exclude that income under Section 280A(g). The money that would have come to you as taxable salary or distribution instead moves as tax-free rent, within the limit. A Simplified Example Suppose your business holds a dozen genuine planning and strategy meetings at your home over the year, and comparable local meeting space rents for around 1,000 dollars a day. The business pays you roughly 12,000 dollars in rent for those days and deducts it. Because you rented your home 12 days, under the 14-day ceiling, you exclude that 12,000 dollars from your personal income. The...
