02. What is the Augusta Rule?

What is the Augusta Rule?

The Augusta Rule, rooted in Internal Revenue Code §280A(g), allows homeowners to rent out their personal residence for up to 14 days per year — and exclude that rental income from their taxes.

This rule was originally created to benefit homeowners in Augusta, Georgia, who rented their homes out during events like the Masters Golf Tournament.

🔎 Key Features of the Rule:

• Applies only if you rent your home, not a property used only for business or investment

• If you rent for 15 or more days, all rental income becomes taxable

• You cannot claim business expense deductions for the rental period as the homeowner

• A business that rents your home can usually deduct the cost as a legitimate expense

✅ Real-World Use Case:

Business owners use this rule to:

• Hold board meetings, strategic sessions, or events in their home

• Deduct the rent payment from their business taxes

• Receive the payment personally — tax-free — if under the 14-day limit

Example: Mark rents his home to his S-Corp for 10 days at $1,000/day.

• Business deducts $10,000

• Mark does not report the $10,000 as income

• Everyone wins — if the documentation is correct ✅

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⚠️ Important Notes:

• Do not mix this rule with a home office deduction

• Must rent to a separate legal entity (not sole proprietorship)

• Must have written documentation, fair market rate, and a real business purpose

📄 Coming up in later sections: templates, agendas, and checklists to help you comply