How Does the Augusta Rule Let Me Earn Tax-Free Income from My Home?

Small business owners often host planning sessions, board meetings, client briefings, or content sprints at home—but many don’t realize there’s a compliant way to turn some of those days into tax-free rental income while your business legitimately deducts the expense. That’s the promise of the Augusta Rule tax strategy under IRS Section 280A(g)—when used correctly, it can amplify cash flow and tighten your documentation discipline. And this is exactly where a trusted advisory relationship beats a “file-and-forget” approach. As we say at B.A.A.P.: “Any CPA firm can record history. Our firm will help you build a future.”

What is the Augusta Rule (IRS Section 280A(g)?

The Augusta Rule says: if you use your home as a residence and rent it out for fewer than 15 days in a tax year, the rent you receive isn’t included in your income, and you can’t take rental-expense deductions for those days personally. In short: up to 14 days of rental income can be tax-free.

Can I rent my home to my own business and can the business deduct it?

Yes—if your company has a bona fide business purpose (e.g., a quarterly planning off-site) and pays a fair market rental rate, your business may deduct the rent as an ordinary and necessary expense under §162, while you personally exclude the income under §280A(g). The key is business purpose and reasonableness.

How do I set a fair rental rate and prove it?

The IRS frames “fair rental price” as what an unrelated party would pay for a comparable space in your area. Gather local venue comparables (hotel meeting rooms, cowork spaces, event homes), keep screenshots/quotes, and retain a signed short-term rental agreement, agenda, attendee list, and minutes for each day. This helps you show FMV and business purpose if asked.

Do I need to issue a Form 1099-MISC to myself?

Generally, yes: when a business pays $600 or more in rent during the calendar year, it typically must file an information return (Form 1099-MISC, Box 1 “Rents”) to report payments to the payee—even if the homeowner excludes the income under §280A(g). There are exceptions (e.g., payments to certain corporations), but they rarely apply to an individual homeowner. Confirm your facts and file on time.

What are the non-negotiable rules I should remember?

• 14-day cap: Rent for fewer than 15 days total in the year.
• Business purpose & FMV: The business needs a real reason, and the rate must be fair.
• No personal rental deductions: You exclude the income; you don’t deduct rental expenses for those days.
• Solid documentation: Written agreement, agenda, attendee list, minutes, and FMV support for each day. (Best practice drawn from IRS definitions and audit-ready documentation standards.)

What does a simple, compliant workflow look like? (Ask your AI to help!)

1. Plan the event: Define the business purpose, date, duration, and attendees.
2. Set FMV: Use AI (ChatGPT, Copilot, Claude) to draft prompts like: “Find meeting-room day rates near [ZIP]. Compare square footage and amenities.” Save your sources.
3. Paper it: Create a short-term rental agreement between you (individual) and your business (entity).
4. Run the meeting: Keep agenda, sign-in, and minutes.
5. Invoice & pay: Issue an invoice from you to the business; the business issues Form 1099-MISC if required.
6. Book it right: Business records rent as an ordinary and necessary expense; you do not report the rent on your return if you stayed under 15 days.

How is this different from a home office deduction?

A home office deduction deals with ongoing, exclusive-use space and prorated expenses. The Augusta Rule is about occasional, short-term rental days (≤14) for documented business events—no personal rental expense deductions for those days, but potentially tax-free income to you and an ordinary rent deduction to the business

Illustrative client example (fictional):

Jasmine owns a marketing agency taxed as an S-Corp. Each quarter, her leadership team holds a 6-hour strategy workshop. Local hotels quote $800–$1,100 per day for comparable meeting rooms. Jasmine rents her home’s open-plan living/dining area to the S-Corp for $900 per day, four times a year (total 4 days). She signs a one-page rental agreement (individual ↔ S-Corp), attaches the agenda, attendee roster, and minutes, and saves hotel quotes as FMV support. The S-Corp deducts $3,600 as rent under §162; Jasmine excludes the $3,600 under §280A(g) because she rented fewer than 15 days. The S-Corp issues a 1099-MISC to Jasmine because total rent paid exceeded $600.

Accountant vs. Advisor—why this strategy belongs in planning, not just filing

An “accountant” prepares returns after the fact. An advisor anticipates issues, builds plans, and helps you document correctly so audit-readiness is baked in. That’s our model at B.A.A.P.—we plan forward, not backward. And again, our north star: “Any CPA firm can record history. Our firm will help you build a future.” 

Key guardrails & common pitfalls (quick checks):

• Exceeding 14 days—even by one day—ends the exclusio
• Under-market rent or vague agendas invite scrutiny. Document FMV and purpose.
• Skipping the 1099-MISC when required can trigger penalty notices—build it into your year-end checklist.

Want this tailored to your business? Book a call today.

Frequently Asked Questions