A Rule Almost Nobody Uses Correctly

There’s a rule in the tax code — Internal Revenue Code Section 280A(g), informally called the Augusta Rule — that lets you rent your own home for up to 14 days a year and not report a dollar of that income.

On its own, that’s a nice, small perk.

Here’s where it gets interesting for business owners.

If you run a business and you already use your home for it — board meetings, planning sessions, the annual company get-together, whatever it is — your business can pay you rent for those days. Same 14-day limit.

For your business, that rent is a legitimate deductible expense.

For you personally, it’s not reported as income at all.

Think about that… there’s genuinely no other move in the tax code that works this way. You can’t take money out of a business, deduct it as an expense, and not claim it personally as income — not through payroll, not through a bonus, not through any W-2 route. This is one of the only exceptions that exists.

Let’s Talk Numbers

Say you own an S corporation, and a comparable local meeting or event space rents for $1,000 a day — not a stretch in Northern California. Rent your home to your business for the full 14 days, and that’s $14,000.

Here’s the part people miss: that’s not just $14,000 tax-free in your pocket. Your S corp also deducts that same $14,000, which reduces the income that flows through to your personal return and gets taxed at your regular rate.

So you’re not just avoiding tax on $14,000 of new income — you’re converting $14,000 that would have been taxed at your marginal rate into $14,000 that isn’t taxed at all. Depending on your bracket, that’s real money, and it’s not a deferral you’ll owe later. It’s gone, permanently, the year you do it.

Who This Actually Works For

This requires a business that’s legally separate from you — an S corporation, a C corporation, a partnership, or a multi-member LLC. If that’s you, this applies.

If you’re a sole proprietor or a single-member LLC, this one’s off the table. The IRS treats you and the business as the same taxpayer, so there’s no one to actually pay you rent — it would just be your own money moving pockets.

What Makes It Airtight

Here’s the part I want to be straight about: this is close to free money, but it’s not zero-effort money.

Any business expense — this one included — has to be ordinary and necessary under Internal Revenue Code Section 162, and the amount has to be reasonable and supportable. A few hours of work throughout the year is what proves it.

Ordinary — twice a year, pull comparable rates for local business or event space for the dates you’re renting. That’s your evidence the rate you’re charging reflects what a real meeting space actually costs — not a vacation-rental nightly rate, and not a number you made up.

Necessary — put the meetings on your calendar as they happen, not reconstructed in December. A dated agenda and a note on what was actually discussed is what proves there was a real business reason to be there.

Reasonable — keep the rent payment separate. If your business already sends you a $10,000 monthly distribution, you can’t just journal entry $1,000 of that and call it rent. Cut a real invoice, and move the rent as its own transfer — even to the same account — so it’s clearly its own transaction at its own amount.

To make this hold up, keep:

• A written rental agreement between you and the business
• Comparable business/meeting-space rates supporting your rate
• A dated agenda for each meeting
• A record of who attended
• A separate invoice and payment for the rent — not folded into a distribution
  

Cover that, and you’re in great shape. Try to build it retroactively in April, and you’ve got a real problem.

Why I’m Not Bringing This Up to Everyone

If you’ve heard about this on TikTok and never heard it from me, there’s a reason: if we haven’t talked tax planning midyear, you don’t have comps from earlier in the year, and you don’t have real records of what was discussed at the meetings you’d be claiming — I can’t recommend this to you in good faith. Not because it doesn’t work. Because doing it without that groundwork is exactly how people lose the deduction.

That’s not theoretical. In one Tax Court case, an S corporation claimed close to $290,000 in Augusta Rule rent over three years for “shareholder meetings” at their homes. The court disallowed almost all of it — down to a small fraction — because there was no record of what business was actually discussed, and the rent they claimed had no relationship to what any real venue would charge.

One Last Thing

You don’t need to meet with me to do this. Honestly, you can ask ChatGPT how the Augusta Rule works and it’ll give you a decent explanation.

Here’s where it actually goes wrong: this strategy mostly fails because people assume it’s easy to prove, so they skip the two or three hours of administrative work — no rental agreement, no comps, no notes.

Without that support, the deduction becomes much harder to defend — it’s a prayer, same as any other expense that shows up on a return with nothing behind it.

That’s the whole lesson in one sentence: the strategy is real, and the paperwork is the strategy.

One Reason You’re Not Hearing About Strategies Like This More Often

Tax preparation and tax planning are different services — if you’ve hired me for the former, I’m not spending the year looking for strategies specific to your business. If you want that, it’s available. Just ask.