The Augusta Rule sounds almost too good to be true: rent your home to your own business, collect the rent tax-free, and let the business deduct it. It is a real strategy — but only if you follow the rules. Here are answers to the eight questions business owners ask most.
1. What does the Augusta Rule actually allow?
Under Section 280A(g), you can rent your personal residence for up to 14 days a year without reporting the rental income. When your corporation or partnership rents your home for a legitimate business purpose, the business deducts the rent and you receive it tax-free.
2. Why does the 14-day limit matter?
The tax-free treatment applies only if you rent the home for 14 days or fewer during the year. Rent it for a 15th day and the rule no longer applies — all of the income becomes reportable. Track the days carefully.
3. What is a reasonable rental rate?
The rent must reflect fair market value — what an unrelated party would pay to rent comparable space for a comparable purpose. Get quotes from local hotels, conference centers, or event spaces and keep them on file to support your rate.
4. Does it work for both corporations and partnerships?
Yes, but the mechanics differ. A corporation deducts the rent as a business expense; an owner-employee receives it personally tax-free. In a partnership, the treatment flows through the entity. The strategy works for both — the documentation is what keeps it clean.
5. What business purpose qualifies?
The rental needs a genuine business reason — board meetings, strategy sessions, team planning days, or annual meetings are common examples. The event should be real, substantive, and something the business would otherwise hold somewhere.
6. What documentation survives an audit?
Keep: corporate minutes or a written record of the meeting, an invoice from you to the business, proof of the comparable rental rates you used, and an agenda or notes showing what was discussed. Pay the rent by check or transfer so there is a clear trail.
7. What mistakes blow up the strategy?
The usual culprits: charging an inflated rate, holding no real meeting, exceeding 14 days, or having no paperwork. Each of these turns a legitimate deduction into an easy target.
8. How do I set it up correctly?
Decide on qualifying events for the year, document fair-market rates, hold real meetings, and paper the transaction properly. Done right, it is a clean, recurring benefit.
Want to use the Augusta Rule and audit-proof it? Manay CPA will help you set it up correctly. Schedule a planning session →
This article is for general informational purposes only and is not tax or legal advice. Consult a qualified tax professional about your specific situation.
