What Is the Section 280A Deduction?

The Section 280A deduction—commonly called the Augusta Rule—allows homeowners to rent out their personal residence for up to 14 days per year without paying tax on the rental income, while the business renting the home may still deduct the expense.

What Is the Augusta Rule?

The Augusta Rule comes from Internal Revenue Code Section 280A(g). It was inspired by homeowners in Augusta, Georgia, who rented their homes during the Masters golf tournament.

Under this rule:

• Rental income is tax-free (if under 14 days)
• The business expense is fully deductible
• The property remains a personal residence

How the Augusta Rule Works

The 14-Day Rule

You can rent your home for up to 14 days per year without reporting the income.

If you exceed 14 days:

• All rental income becomes taxable

Personal Residence Requirement

The property must be:

• Your primary residence or
  
• A secondary personal residence

It cannot be classified as a full-time rental property.

No Income Reporting Requirement

If you meet the rules:

• You do not report rental income
• You do not deduct rental expenses

Who Can Use Section 280A?

This strategy is most commonly used by:

• S Corporation owners
  
• LLC owners
  
• Self-employed professionals
  
• Small business owners

How to Use the Augusta Rule (Step-by-Step)

Step 1: Hold a Legitimate Business Meeting

Examples:

• Board meetings
  
• Strategy sessions
  
• Team retreats

Step 2: Rent Your Home to Your Business

Your business pays you personally.

Step 3: Determine Fair Market Rent

Use:

• Local rental comps
  
• Event space pricing
  
• Hotel conference rates

Step 4: Document Everything

• Meeting agenda
  
• Attendee list
  
• Meeting minutes

Step 5: Record the Transaction

• Business issues payment
  
• Proper accounting entries are made

Augusta Rule Example

Result:
You receive $10,000 tax-free, and your business deducts $10,000.

What Counts as Fair Rental Value?

Fair market value must reflect what someone would reasonably pay.

Acceptable methods:

• Comparable Airbnb listings
  
• Local event venues
  
• Hotel meeting room rates
  

Avoid:

• Inflated or unrealistic pricing

Documentation Requirements (Critical for Audit)

To defend your deduction, maintain:

• Meeting agendas
  
• Attendee lists
  
• Signed minutes
  
• Rental agreement
  
• Invoice from homeowner to business
  
• Proof of payment
  
• Market rate analysis

Common Mistakes to Avoid

• Charging above market rates
  
• Failing to document meetings
  
• Exceeding 14 days
  
• Using the home without a business purpose

IRS Risks and Audit Considerations

The Augusta Rule is legal—but scrutinized.

Red Flags:

• No documentation
  
• Round-number payments
  
• Unrealistic rental rates
  

Best Practices:

• Keep detailed records
  
• Use reasonable pricing
  
• Treat it like a real transaction
  

Section 280A vs Home Office Deduction

Benefits of the Augusta Rule

• Tax-free income
  
• Business expense deduction
  
• Simple to implement
  
• No depreciation recapture

When You Should NOT Use It

• If you cannot justify fair rental value
  
• If documentation is weak
  
• If your business rarely holds meetings

Final Thoughts

The Section 280A deduction is one of the most powerful—and underutilized—tax strategies available to business owners. When implemented correctly, it creates a rare opportunity to generate tax-free income while reducing business taxes.

However, compliance is critical. Proper documentation and reasonable pricing are what separate a legitimate strategy from an audit risk.

Frequently Asked Question

What is the Augusta Rule in simple terms?

The Augusta Rule allows homeowners to rent their residence for up to 14 days per year without paying tax on the rental income. At the same time, a business renting the property can deduct the expense, creating a dual tax benefit.

Can I rent my home to my S corporation?

Yes, you can rent your home to your S corporation for legitimate business purposes such as meetings or retreats. The key requirements are fair market rental value, proper documentation, and staying within the 14-day annual limit.

What is considered fair rental value?

Fair rental value is the price someone would reasonably pay to rent a similar space. This can be determined using local rental listings, event venues, or hotel meeting room rates. Inflated pricing may trigger IRS scrutiny.

What happens if I exceed 14 days?

If you rent your home for more than 14 days in a year, all rental income becomes taxable. You also must report the income and may deduct related rental expenses, changing the tax treatment entirely.

Is the Augusta Rule legal?

Yes, the Augusta Rule is fully legal and codified under Section 280A(g) of the Internal Revenue Code. However, improper use—such as lack of documentation or inflated pricing—can lead to audit issues.

What documentation is required for Section 280A?

You should keep meeting agendas, attendee lists, minutes, rental agreements, invoices, proof of payment, and evidence supporting fair market rental value. These records are essential in case of an IRS audit.

Can landlords use the Augusta Rule?

Generally, no. The rule applies to personal residences, not properties primarily used as rentals. Landlords typically must report rental income and cannot exclude it under Section 280A(g).

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