The augusta rule comes from Section 280A(g) of the Internal Revenue Code. If you use a home as a residence and rent it for fewer than 15 days in a year, the rental income is excluded from your taxable income and the rental expenses are not deductible. For a business owner, the planning value sits on the other side of the transaction: your company pays the rent and, if the expense qualifies, deducts it.
The augusta rule IRS limit counts every rental of the home, not only the days rented to your business. One day over the limit turns the income taxable under normal rental rules. The number to remember is the cap, and the discipline to remember is the day count.
The augusta rule requires a separate taxpayer to pay you. An S corp, C corp, or partnership is a separate taxpayer from its owner. A sole proprietorship or single-member LLC generally is not, so rent paid to yourself creates no deduction.
For an augusta rule S corp setup, the exclusion is only half the test. The corporation’s deduction still has to be ordinary, necessary, and reasonable in amount, and related-party rent gets extra scrutiny. Adams and Reese identifies inflated rent, inconsistent income reporting, and weak meeting records as the recurring problems in S corp cases.
The Sinopoli decision shows how courts treat thin records. The judge looked for written proof that each claimed meeting happened, such as minutes, agendas, or calendars, as Financial Planning reported. Meetings without proof earned no deduction. An augusta rule IRS review comes down to this file.
| What Holds Up |
What Fails |
| Written rental agreement signed before the rental | Agreement drafted after an audit notice |
| Agenda and minutes for each meeting | Calendar entries with no purpose or attendees |
| Rate backed by quotes from comparable venues | Rate chosen to hit a target deduction |
| Payment from the business account on a set schedule | Cash or irregular transfers |
The augusta rule is a documentation strategy as much as a tax strategy. Keep the file as the meeting happens, not afterward.
The math is the documented market rate for the space, multiplied by up to 14 days. The business deducts that total, and you report no rental income. Your savings equal the deduction times the tax rate you would otherwise pay, so the same rent produces different results at different income levels.
A RainwaterCPA client shows how this plays out in a real plan. A used car dealership co-owned by two partners and structured as an S corp had a CPA who filed accurate returns but never built a forward-looking plan. RainwaterCPA layered the augusta rule with an accountable plan, an employee achievement award program, and health insurance and retirement plan design on the business side, plus individual strategies for each owner. The full plan produced $45,860 in combined same-year tax savings, or $22,930 per owner. The augusta rule was one strategy in that plan, not the source of the whole figure.
If you’re not sure whether your entity and your records can support this strategy, a short assessment will tell you.
RainwaterCPA is a tax planning firm built around proactive strategy, and the augusta rule is one of the tactics it brings into a client’s formal tax plan. Clients meet with the firm four times a year to update numbers and tax projections, so the rental days, rate, and meeting records line up with the actual calendar instead of getting reconstructed in March. The team includes CPAs and EAs, and the firm has been recognized as an Inc. 5000 company and a Baltimore Business Journal Top 25 Firm.
Every strategy RainwaterCPA recommends is legal, and the firm sizes each one to the client’s entity and risk. Owners who want this tactic reviewed alongside other options can start with tax planning for business owners. Owners who need the year-end filing handled to match are covered under tax compliance services. If a return is already under review, the firm also handles IRS audit defense.
How many days can I rent my home to my business under the Augusta Rule?Up to 14 days per year. At 15 days or more, the rental income becomes taxable under normal rental rules. The count includes all rentals of the home, not only rentals to your business.
Does the Augusta Rule work for an S corp?Yes. An S corp is a separate taxpayer from its shareholder, so it can pay you rent for business use of your home. The corporation’s deduction still has to be ordinary, necessary, and reasonable in amount, and that is where S corp owners most often get into trouble.
Can a sole proprietor or single-member LLC use the Augusta Rule?Generally no, because the rule needs a separate taxpayer to pay you. A disregarded entity is you for tax purposes, so rent paid to yourself does not create a deduction. Confirm your entity structure with a CPA before planning around it.
What does the IRS look for in an Augusta Rule audit?Support for the rental rate, proof of business use, and records created at the time. In Sinopoli, the court wanted minutes, agendas, or calendars showing each meeting happened. Missing records led to disallowed deductions.
How do I set a fair rental rate?Base it on what comparable venues charge for similar space and purpose in your area, and keep the quotes. A rate chosen to produce a target deduction is the pattern courts have rejected.
Do I report the rent as income?When the rule applies, the rent is excluded from your taxable income under Section 280A(g). The business records it as an expense. State treatment can differ, so confirm reporting with your CPA.
Is the Augusta Rule right for my business?Fit depends on your entity type, whether you hold real business meetings at home, and whether you will keep the records. A quarterly tax plan shows where it sits next to your other options. RainwaterCPA reviews these questions in its free assessment.
The augusta rule rewards owners who treat it as a documented business arrangement, with a signed agreement, a supported rate, and records for every meeting. RainwaterCPA builds it into a quarterly plan so the paperwork exists before the deduction does. Book your free assessment and the team will respond quickly, even during tax season.
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