Can Your Business Rent Your Home Tax-Free? Understanding the Augusta Rule
There are not many tax rules that let a business owner receive money from their business without including it in taxable income.
The Augusta Rule is one of the better-known exceptions.
Under certain circumstances, your business may be able to rent your home for a legitimate business purpose, deduct the rental payment, and you may be able to receive that rent without reporting it as taxable income.
It sounds simple.
But, like most tax strategies, the details matter.
What Is the Augusta Rule?
The Augusta Rule is the nickname commonly given to Internal Revenue Code Section 280A(g).
Under this rule, if you use a dwelling as a residence and rent it for fewer than 15 days during the year, the rental income generally is not included in your gross income.
In other words, you may be able to rent your home for up to 14 days during the year without reporting the rental income on your individual tax return.
How Can a Business Use the Rule?
Suppose your S corporation, C corporation, or partnership needs a place to hold a legitimate planning meeting, training session, board meeting, or other business event.
Instead of renting a conference room or event space, the business rents your home.
For example, assume the business holds a planning meeting at your home and pays you $600 for the use of the property.
Potentially:
The business deducts the $600 rental expense.
You receive $600 in rental income.
You do not report the $600 as taxable rental income under Section 280A(g).
The Augusta Rule generally applies on a property-by-property basis, so more than one qualifying residence could potentially fall under the fewer-than-15-days rule during the year.
This generally does not work the same way for a sole proprietorship or disregarded single-member LLC, because the business and owner are treated as the same taxpayer for federal income tax purposes.
The Business Needs a Legimate Reason
Section 280A(g) deals with the tax treatment of the rental income received by the homeowner.
It does not automatically give the business a deduction.
The business still needs a legitimate business reason for using the property, and the rental expense generally needs to qualify as an ordinary and necessary business expense under Section 162.
That means the rent should be reasonable and the business should maintain documentation supporting the payment and the underlying business purpose.
The Bottom Line
The Augusta Rule can create an unusual tax result:
Your business may receive a deduction for renting your home, while you may be able to receive the rental income without including it in taxable income.
But both sides of the transaction need to work.
The homeowner must qualify for the exclusion under Section 280A(g), and the business still needs a legitimate, reasonable, and supportable rental expense.
At Sharp Tax & Accounting, we help business owners evaluate tax-planning strategies based on how the rules actually apply to their businesses—not just how they appear in a social media post.
This article provides general tax information and is not intended as individualized tax, legal, or financial advice. Tax treatment depends on the specific facts and circumstances of each situation.