- IRC § 280A(g) allows up to 14 days of personal-residence rental per year tax-free to the homeowner verified May 25, 2026, including renting to your own separate-entity business if the rental has a real business purpose, an arm's length rate, and contemporaneous documentation.
- The defensible setup requires a separate business entity (S-corp, C-corp, partnership, or multi-member LLC), not a sole prop or single-member LLC, plus written rental agreement signed before the event, comparable-transactions evidence of fair market rent, real business agenda and minutes for each rental day, and proof of payment.
- The 2023 Tax Court decision in Sinopoli v. Commissioner disallowed an Augusta Rule deduction where rates significantly exceeded local comparables and documentation was thin; the case is the practical floor for how much documentation an Augusta Rule rental needs to survive audit.
In this article
What is the Augusta Rule in 2026?
The Augusta Rule is the practitioner shorthand for the rule at IRC § 280A(g): if a taxpayer uses a dwelling unit during the taxable year as a residence and the dwelling unit is rented for less than 15 days during the year, no rental income is included in the taxpayer's gross income and no deductions attributable to the rental use are allowed[1]. The provision originated as a quality-of-life exception for residents of cities that host major events (the Augusta, Georgia, Masters Tournament being the canonical example, where residents historically rented out their homes to tournament visitors for that week), allowing them to receive the rental income without the administrative burden of reporting passive rental activity.
For business owners, the same provision applies to a separate-entity business renting the owner's home for a legitimate business purpose. The mechanics are unchanged: the homeowner receives the rent tax-free under § 280A(g), and on the business side, the rent is an ordinary and necessary business expense deductible under IRC § 162. The result is a deduction at the entity level with no corresponding income recognition at the owner level, on up to 14 days of rental per year.
Section 280A originated in the Tax Reform Act of 1976 to police vacation-home rental abuse. The 14-day provision was included as the de minimis exception for occasional personal-residence rental. Its application to owner-operated entity rentals has been recognized in practice for decades but received recent and concrete attention from the Tax Court in Sinopoli v. Commissioner, T.C. Memo 2023-105, which the IRS and practitioners alike now treat as the working baseline for documentation expectations[2].
The statute says "less than 15 days," which means 14 days is the practical maximum. Day 15 triggers the regime change: the entire year's rental income becomes reportable, the deduction analysis switches to the section 280A vacation-home rules with allocated expense rules, and the simple tax-free structure collapses. Track usage by calendar day throughout the year; the day count is not negotiable.
Who can use the Augusta Rule and who cannot?
Eligibility depends on two threshold tests: (1) the property must be the taxpayer's dwelling unit used as a residence during the year, and (2) the rental must be to a real counterparty in an actual rental transaction.
Dwelling unit as residence: The property must qualify as the taxpayer's personal residence under section 280A. This includes a primary residence, a vacation home used personally during the year, or any other dwelling that the taxpayer used for personal purposes for more than the greater of 14 days or 10 percent of the days rented during the year. Personal use by the owner, spouse, or other family members is treated as the owner's personal use for this test. A property used exclusively as rental (no personal use) does not qualify for the § 280A(g) exclusion because it is not a residence.
Real rental transaction to a separate entity: For the Augusta Rule to apply to owner-business rentals, the business must be a separate legal entity from the homeowner. The entities that qualify:
- S-corporations: Yes. The S-corp is a separate entity that contracts with the shareholder-homeowner as lessee.
- C-corporations: Yes. Most aggressive use case because the C-corp pays at the entity tax rate; the rent shifts income from C-corp (21 percent) to nothing (tax-free at the owner level).
- Partnerships and multi-member LLCs: Yes. The partnership is a separate entity and the rental transaction is between the partnership and the individual partner.
- Single-member LLC, treated as disregarded for federal tax: No. The IRS sees a single individual taxpayer and disregards the LLC; there is no separate entity to rent to.
- Sole proprietor (Schedule C): No. Same reasoning; no separate entity.
A single-member LLC that has elected S-corporation status under Form 2553, however, is treated as an S-corporation for federal tax purposes and qualifies. The form-and-substance line here is whether the entity files its own return and is recognized as separate for federal tax; disregarded entities are not.
Technically yes, but the move is rarely worth it on its own. If your business is large enough that the Augusta Rule savings ($14,000 to $50,000 of deductions across 14 days at typical comparable rates) justify the compliance overhead of converting to an entity that files separately, you almost certainly should also be evaluating S-corp election for FICA savings, multi-entity structuring, and 199A optimization. See our multi-entity structuring article and S-corp vs LLC analysis for the broader entity-choice math.
How is fair market rent set defensibly?
This is the lever where Augusta Rule audits are won or lost. The statute does not specify a rate; it requires that the rent be at fair market value, implicitly under the general principle that intercompany or related-party transactions must reflect arm's length pricing[3]. The Tax Court in Sinopoli disallowed rental deductions where the rates charged by the taxpayer's home to the taxpayer's business significantly exceeded local market comparables[2]. The takeaway: fair market rent must be supportable by comparable third-party transactions, contemporaneously documented.
The defensible method is a written comparable-transactions analysis:
- Identify three to five local venues that would host an event of the same type, size, and duration. Examples: event spaces, conference centers, executive meeting rooms, hotel function rooms, art galleries (for photoshoots), private dining rooms, country club meeting rooms.
- Obtain their quoted day rates. Capture this in writing (printed quotes, screenshots of price pages, emailed quotes) and date-stamp the documentation.
- Document the comparability factors: square footage, capacity, amenities (catering, AV equipment, parking, breakout rooms), location, day-of-week pricing.
- Set your rate within the range of the comparables, generally toward the middle or lower portion of the range. Rates significantly above the highest comparable invite reallocation.
- Retain the comparables documentation in your tax workpapers for the year of the rental.
Typical defensible rates for residential properties in mid-sized US cities run in the range of $1,000 to $5,000 per day for events accommodating 10 to 25 people. Large coastal cities (San Francisco, New York, Los Angeles) can support higher rates; rural and suburban areas trend lower. The rate also varies materially by amenities: a property with catering capacity, full audiovisual setup, and dedicated event space supports higher rates than a property where the business is meeting in the family living room.
In Sinopoli v. Commissioner, the taxpayer rented their home to their business at rates substantially in excess of local comparable venues, including rates that were several multiples of the highest credible third-party rate. The Tax Court allowed only the amount of rent that was supported by fair market value and disallowed the excess; the entity-level deduction was correspondingly reduced. The takeaway is conservative: stay within the comparable range, document the comparables contemporaneously, and assume an examiner will look.
What does the audit-defensible documentation stack look like?
Most CPAs recommend the business file a 1099-MISC for the rent paid even though it nets to zero under § 280A(g) at the recipient level. The homeowner reports the rental income on Schedule E (or as "other income" on Schedule 1 depending on practice), then takes a corresponding deduction or exclusion entry showing the § 280A(g) exclusion. The IRS audit-trail benefit of the 1099 is meaningful: the business deduction matches the homeowner's reported income line that is then properly excluded by statute. Some preparers omit the 1099 because the net effect is zero; the 1099 is the more conservative approach.
Worked scenarios across income levels
Solo S-corp consultant
S-corp pays homeowner $21,000 for 14 monthly leadership-planning offsites held at home. Business deducts $21,000 (saving ~$4,400 in federal income tax at the 21 percent marginal rate, plus ~$3,200 in self-employment tax on the rent that does not flow through as SE-taxable income). Homeowner excludes the rent under § 280A(g). Net annual savings approximately $7,600.
5-person agency partnership
Partnership pays the managing partner $30,000 for hosting quarterly strategic-planning offsites and an annual partner retreat. Partnership deducts $30,000 against pass-through income (saving ~$10,500 in federal tax at 35 percent marginal). Comparable local conference-center rates run $2,500 to $3,500 per day for similar groups.
E-commerce LLC with multiple shoots
Multi-member LLC (taxed as partnership) pays the principal owner $28,000 for hosting product photoshoots, video shoots for marketing content, and quarterly team strategy sessions. Comparable creative-event rentals in the area run $1,800 to $2,500 per day. Business deduction $28,000 at the partnership-level; saving approximately $9,800 in tax for owners in 35 percent marginal bracket.
C-corp medical practice
C-corp pays the physician-owner $36,000 for hosting quarterly board meetings, semi-annual CME sessions, and a year-end leadership retreat. Comparable corporate executive meeting space in the metropolitan area runs $3,800 to $5,200 per day. C-corp deduction reduces corporate tax by $7,560 at 21 percent; physician-owner receives $36,000 tax-free at the personal level. Combined effective benefit substantial relative to the 8-day usage.
Get the 2026 Augusta Rule documentation packet template
One-page checklist plus a ready-to-edit rental agreement template, a comparable-transactions log template, and a meeting-minutes template designed to meet the Sinopoli documentation bar.
Where Augusta Rule deductions get clawed back
No separate entity
Schedule C sole proprietor or disregarded single-member LLC tries to "rent" their home to themselves. There is no separate entity to be the lessee; the IRS treats the rental as a single-taxpayer transaction and disallows the entire structure.
Rates exceed local comparables (Sinopoli)
Rates several multiples of local comparable venues with no comparability analysis to justify the premium. The Tax Court in Sinopoli allowed only the rate supported by comparable transactions and disallowed the excess. Comparable-transactions documentation is the floor.
No real business purpose
"Quarterly strategy retreats" that look from the records like family vacations or holiday dinners. The IRS examiner asks for the agenda, attendees, and outcome of each rental day; if those are not real, the deduction collapses on substance grounds regardless of the rental agreement.
Day 15 (or higher) blows up the exclusion
Taxpayers occasionally count their personal-use days too generously, or fail to track cumulative rental days across multiple events, and exceed 14. At 15 or more days, the entire year's rental income becomes reportable and the deductions are subject to the vacation-home rules.
Backdated rental agreements
The rental agreement is signed after the rental day occurred, often after a CPA flags the Augusta Rule mid-year. The IRS treats backdated documentation as substantive evidence of a sham; the entire structure can be unwound on substance grounds.
Family-member double dipping
Spouse rents to spouse's business while the business also pays the spouse for services. The IRS examines whether the rental is genuinely separate from the compensation arrangement and may recharacterize part or all of the rent as additional compensation, subject to FICA / payroll-tax treatment, where the rental and the compensation are not at arm's length.
Yes, with care on the allocation. The home office deduction under section 280A(c) applies to a specific portion of the home used regularly and exclusively for business; the Augusta Rule covers separate rental days for different (typically larger or different) spaces. Most practitioners structure the home office in a dedicated room and host Augusta Rule events in living, dining, or other meeting spaces that are not the home office.
This avoids the allocation question of how to split expenses between the home office (deducted at the personal level) and the rental (deducted at the entity level). If the same space is used for both, careful allocation is required and the documentation burden increases.
Bottom line
The Augusta Rule is real, statutory, and widely usable by owners of separate-entity businesses. The federal tax benefit is meaningful: a typical defensible structure can shift $20,000 to $40,000 per year of deductions from non-deductible personal living to entity-level business expense at no income recognition to the homeowner. Across a decade of operation, that compounds to a six-figure tax benefit for many owner-operated businesses.
The reasons the rule gets clawed back at audit are predictable and avoidable: inflated rates without comparable-transactions evidence, missing business purpose documentation, backdated rental agreements, and structures that lack a separate entity to be the lessee. The Sinopoli Tax Court decision in 2023 made the bar concrete: rates must be supportable by local comparables, and rates that significantly exceed the comparable range will be reallocated.
The execution worth doing is unglamorous: a written rental agreement signed before each event, three to five local venue quotes documented contemporaneously, an agenda with attendees and outcome for each rental day, proof of payment by check or ACH, and a year-end calendar confirming the 14-day cap. None of this is exotic, none of it requires specialized software, and all of it can be assembled in under an hour per rental event with reasonable discipline. The Augusta Rule rewards documentation; the documentation is the point.
- Internal Revenue Code, 26 U.S.C. § 280A(g) (rental of dwelling unit for fewer than 15 days; income exclusion). law.cornell.edu/uscode/text/26/280A. return
- United States Tax Court, Sinopoli v. Commissioner, T.C. Memo 2023-105 (Aug 14, 2023) (disallowing portion of Augusta Rule deduction where rate exceeded fair market value supported by comparables). ustaxcourt.gov (opinion searchable by case name and date). return
- Treasury Regulations, 26 CFR § 1.280A-1 through 1.280A-3 (rules implementing IRC § 280A including allocation of expenses and definitional terms). ecfr.gov § 1.280A-1. return
- Internal Revenue Service, Publication 527: Residential Rental Property (Including Rental of Vacation Homes), current edition. irs.gov/forms-pubs/about-publication-527. return
- Internal Revenue Service, Publication 535: Business Expenses (current edition; ordinary and necessary business expense framework). irs.gov/forms-pubs/about-publication-535. return
- Internal Revenue Code, 26 U.S.C. § 162 (trade or business expenses; ordinary and necessary deduction). law.cornell.edu/uscode/text/26/162. return
Frequently asked questions
What is the Augusta Rule?
The Augusta Rule is the common name for the provision in IRC section 280A(g) that allows a homeowner to rent their dwelling unit for up to 14 days per year without including the rental income in gross income. The name comes from Augusta, Georgia, where residents have historically rented out their homes during Masters Tournament week. For business owners, the rule creates an opportunity to rent their personal residence to their own separate-entity business (S-corp, C-corp, partnership, multi-member LLC) for legitimate business purposes, receiving the rent tax-free while the business takes the rent as a deduction.
Can a sole proprietor or single-member LLC use the Augusta Rule?
No. The Augusta Rule requires a rental transaction between the homeowner and a separate legal entity. A sole proprietor reporting on Schedule C and a single-member LLC treated as disregarded for federal tax purposes are not separate from the individual owner; the IRS sees a single taxpayer attempting to rent property to themselves, which is not a recognized transaction. The structures that support Augusta Rule use are S-corporations, C-corporations, partnerships, and multi-member LLCs taxed as partnerships.
How is fair market rent determined for an Augusta Rule rental?
Fair market rent is the rate that unrelated parties would have agreed to for the same use of the same property for the same period. The defensible method is comparable-transactions analysis: identify three to five local venues (event spaces, conference centers, executive meeting rooms, hotel function rooms) that host similar events of the same size and duration, obtain their quoted rates, and price your home rental within or near that range.
Documentation of the comparables, gathered contemporaneously, is the single most important piece of audit defense. Rates that significantly exceed the comparable range invite reallocation under IRC section 482-style fair-pricing principles.
What documentation is required to defend an Augusta Rule rental at audit?
The audit-defensible documentation package includes: a written rental agreement signed and dated before the rental period; comparable-transaction research evidencing the fair market rent; a per-event agenda with attendees and business purpose; meeting minutes or session notes documenting the business activity that occurred; proof of payment (check, ACH, or transfer record); and a year-end calendar showing cumulative rental days remain at or under 14. Without contemporaneous documentation, the rule can collapse at audit on substance grounds even if the underlying facts would have supported it.
Does the Augusta Rule work if I have a home office deduction?
The Augusta Rule and the home office deduction are independent tax positions and can coexist for the same residence, but with care. The home office deduction is allowed under IRC section 280A(c) for the portion of the home used regularly and exclusively for business; the Augusta Rule is allowed under section 280A(g) for personal-residence rental of 14 days or fewer.
The interaction matters at the level of expense allocation: if you take a home office deduction, the expenses attributable to the home office area are deducted there, and rental of the same area under the Augusta Rule for additional days does not double-count. Most practitioners separate the spaces (home office in one area, Augusta Rule events held in distinct living or meeting spaces) to avoid the allocation question entirely.