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Deduction · IRC §280A(g) Typical recovery $5K to $25K per year

The Augusta Rule: rent your home to your business 14 days a year, tax-free

IRC §280A(g) lets a homeowner rent out their personal residence for up to 14 days in a tax year and exclude that rental income from gross income entirely. When the business renting the home is the owner's own S-corp, partnership, or C-corp, the business deducts the rent and the owner recognizes none of the income. The rule is real. The substantiation standard is what catches taxpayers who try it without doing the work.

TL;DR

§280A(g) provides a clean income-exclusion rule for short-term rental of a dwelling unit used as a personal residence: if the unit is rented for fewer than 15 days during the tax year, the rental income is not included in gross income (and the related expenses are not deductible against rental income, because there is no rental income to deduct against). The rule applies regardless of who the renter is. When an S-corp or C-corp shareholder-employee rents their personal residence to the corporation for a legitimate business purpose (board meetings, off-site planning sessions, client events) at a fair-market rent for 14 days or fewer, the corporation deducts the rent as an ordinary business expense, the shareholder excludes the income under §280A(g), and the IRS gets a net deduction without offsetting income. Typical recovery for an owner-operator with a moderately-priced home: $5,000 to $25,000 per year. The Tax Court case Sinopoli v. Commissioner (2023) is the most-cited caveat: rent rates substantially above local fair-market comps will be disallowed.

Where the rule came from and how it works

The "Augusta Rule" nickname comes from the Masters Tournament, where Augusta-area homeowners rent their houses to tournament attendees for a week each year. Congress added §280A(g) to the code to keep that one-week-a-year rental income off the homeowner's return without forcing the homeowner to deduct a portion of mortgage interest, depreciation, and operating expenses against it. The mechanics turned out to apply broadly: any dwelling unit used as a residence and rented for fewer than 15 days in the tax year qualifies, regardless of the renter's identity.

The corporate-rental application is straightforward. Most S-corp and C-corp closely-held businesses have a real need for periodic off-site working sessions: annual strategy retreats, multi-day board meetings, training sessions, client entertainment events. Hosting those at the owner's home (rather than a hotel conference room) is a normal business decision. §280A(g) lets the corporation deduct the rent paid to the owner for the use of the space, the owner receives the rent, and the rental income is excluded from the owner's gross income because the unit was rented for fewer than 15 days.

The clean structure makes it attractive: a deduction at the business level with no corresponding income at the owner level. The dollar leverage is the federal-plus-state marginal rate of the corporation (or, for pass-throughs, the owner's individual marginal rate) applied to the gross rent. For a 14-day arrangement at $1,500 per day, that is $21,000 of deductible rent and roughly $7,000 of federal tax recovery for an owner in a 33% combined bracket.

Who qualifies and how the days are counted

Four conditions need to be in place:

  1. The dwelling unit is used as a residence. §280A defines "used as a residence" as personal-use days exceeding the greater of 14 days or 10% of total rental days. A primary residence trivially meets the test; a vacation home meets it if the owner uses it personally for at least 14 days.
  2. The unit is rented for fewer than 15 days in the tax year. Days are counted cumulatively across all renters. If the home is rented to the corporation for 12 days and to an unrelated party for 4 days, that totals 16 days and the §280A(g) exclusion is lost for the entire year.
  3. There is a legitimate business purpose for the rental. A documented business purpose for each rental day. Board meetings, annual strategy off-sites, leadership team retreats, training sessions, client entertainment events, recorded video shoots. Sitting alone in the home office while reading email does not establish business purpose.
  4. The rent is fair market. The most contested element. Rent has to reflect what an unrelated third party would charge for comparable space in the same market. Comparable hotel conference-room rates, comparable Airbnb full-home daily rates, comparable short-term meeting-space rates are the typical comparables. Rent substantially above the comparable range is the Sinopoli failure mode.

The Sinopoli Tax Court case

In Sinopoli v. Commissioner (T.C. Memo. 2023-105), three married couples who owned an S-corp running tax-preparation businesses claimed §280A(g) on rentals of their personal residences to the S-corp for monthly "shareholder meetings." The rental rates ranged from $1,500 to $4,000 per day for routine internal meetings; total claimed rent across the three residences was over $290,000 for the years at issue. The Tax Court disallowed most of the deductions on two grounds:

  1. The claimed rent rates substantially exceeded local fair-market comparables. The Court reduced the allowable rent to roughly $500 per day, the rate it found supportable for comparable meeting space in the geography. The excess was disallowed as a business deduction and re-characterized as a constructive distribution.
  2. The documentation was thin. Generic meeting minutes referencing "S-corp business" without specifics about the meeting agenda, attendees, and outcomes. The Court found the substantiation insufficient to establish business purpose for several of the claimed days.

The case did not invalidate the Augusta Rule. It validated the substantiation standard. Rentals at defensible fair-market rates, documented with specific agendas and business purpose, survive scrutiny. The Sinopoli failure mode is rent substantially above comp and documentation that does not establish business purpose.

How to do it right

A defensible §280A(g) program for an owner-operator business looks like this:

  1. Rental agreement. A written rental agreement between the corporation and the owner for each rental period, identifying the dates, the daily rate, the business purpose, and the payment terms.
  2. Fair-market-rent file. Documentation showing how the daily rate was set. Quotes from three to five hotel conference rooms, Airbnb full-home daily rates, or short-term meeting-space rentals in the same market for comparable square footage and amenities. Save the screenshots or the email quotes; the file is the substantiation.
  3. Meeting agenda and minutes. A real agenda with the business topics covered, who attended, decisions made, and any follow-on action items. "Quarterly strategy review covering YTD financial results, 2026 hiring plan, vendor consolidation" is substantive. "Q1 shareholder meeting" is not.
  4. Form 1099-MISC if total annual rent ≥ $600. The corporation issues a 1099-MISC for the rent paid to the owner. The owner reports the income on Schedule E (not Schedule C) and applies the §280A(g) exclusion to reduce the included amount to zero. The 1099 plus the exclusion election is the cleanest paper trail.
  5. Cap at 14 days, all renters combined. Track total rental days for the residence across all renters. Going over 14 cumulative days disqualifies the §280A(g) exclusion for the entire year; all rental income (including from unrelated parties) becomes includible.

A typical owner-operator deploys §280A(g) for 4 to 8 days a year (quarterly off-sites plus an annual planning retreat), at fair-market rates of $400 to $1,500 per day depending on the home and the market. Annual recovery in the $5,000 to $20,000 range with clean documentation is the realistic envelope.

Common mistakes that lose the deduction

  1. Rent rates not supported by local comps. The Sinopoli failure mode. Set the rate using comparable conference-room and short-term-rental data, document the comps, and stay within that range.
  2. No written rental agreement. The Court treats undocumented intra-family rentals skeptically. A one-page agreement signed before the rental period closes the question.
  3. Generic or fabricated meeting minutes. Real agendas with real topics. The minutes should look like minutes a regulator would expect to see.
  4. Going over the 14-day cumulative cap. Track days carefully. Day 15 wipes out the §280A(g) exclusion for the whole year; all rental income becomes includible.
  5. Failing to issue a Form 1099-MISC. If annual rent reaches $600, the corporation files a 1099-MISC reporting the rent. Skipping the 1099 invites the IRS to challenge the business-deduction posture; including it creates a clean paper trail.
  6. Stacking with home-office deduction confusion. If the owner takes a home-office deduction under §280A(c) or an accountable-plan reimbursement for the home office, the days the home office is used for business should not be the same days claimed under §280A(g). Keep the two regimes separate.

Related reading

Source authority: IRC §280A(g) and Sinopoli v. Commissioner (T.C. Memo. 2023-105). Statute and Tax Court history available via the standard tax-research databases.

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