Topic 09 · 5 min read
The Augusta Rule
Rent your home out for fourteen days and report nothing.
A quirk in the law lets you rent your personal residence for up to fourteen days a year without reporting the rent as income at all. It is named for the Masters golf tournament, where homeowners rent to visitors for the week.
What to know
- Fourteen days is the ceiling
- Rent the home fifteen days and the entire year's rent becomes reportable income, not just the extra day.
- It must be a personal residence
- A main home or a second home qualifies. A property already treated as a rental does not.
- Business owners renting from themselves
- An owner can have their company rent the home for legitimate meetings, deducting the rent on the business side while the personal side excludes it.
- Fair market rent only
- The rate must match what a comparable local venue would charge, supported by written quotes gathered at the time.
- Document the substance
- A written rental agreement, meeting agendas, attendee lists, and a company check make the difference between a strategy and a disallowed deduction.
The tax benefit
Rent is deducted by the business and excluded from the homeowner's income, so the same dollars leave taxable income without reappearing anywhere.
Worked example
Twelve board meetings
A company holds twelve quarterly and planning meetings at the owner's home at a documented $1,200 per day. The business deducts $14,400 and the owner reports none of it.
Watch out for
- Inflated daily rates with no comparable quotes are a common audit target.
- A sham meeting on paper is not a meeting; substance is required.
- Rent paid by an S corporation to its owner still needs a proper 1099 and clean records.
Terms from this topic
Augusta RulePersonal residenceFair market rentSection 280A(g)
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