The Augusta Rule: Rent Your Home to Your S-Corp Tax-Free

IRC §280A(g) — sometimes called the "Augusta Rule" — lets S-corp and partnership owners rent their personal residence to the business for up to 14 days per year. Result: the rental income is completely excluded from your personal taxable income. The business deducts the rent. Zero tax on the income you receive. This is one of the few legal tax strategies that genuinely creates money from thin air — and it's widely underused because most generalist advisors have never set it up.

How the 14-day exclusion works

IRC §280A(g) provides a blanket exclusion: if you rent your dwelling unit for fewer than 15 days during the year, you are not required to include the rental income in gross income and you are not allowed to deduct rental expenses against that income.¹

This means:

• Your S-corp pays you rent and deducts it as an ordinary business expense (meetings, retreats, board sessions, strategy days)
• You receive the rent personally and report nothing on Schedule E — it doesn't appear on your tax return at all
• The rental income is not subject to federal income tax, state income tax, or self-employment tax

The flip side: if you go to 15 or more rental days, the exclusion disappears entirely. All rental income — from day one through day fifteen and beyond — becomes taxable. Not just the day-15 income. All of it. The threshold is hard and binary.

What counts as a rental day

The IRS counts calendar days, not hours. A two-hour board meeting on a Tuesday morning uses one full rental day toward your 14-day limit. A weekend strategy retreat uses two days. Plan carefully:

• Board and shareholder meetings — formal enough to document, easy to justify
• Annual strategic planning retreat — one weekend = 2 days
• Client or team meetings held at your home — each calendar day counts once, regardless of how many meetings occur that day
• Training sessions or continuing education hosted at your home

What doesn't qualify: personal use days, days when the primary activity is not a legitimate business purpose, or days your home is used by business guests but not as a rental (hosting a client dinner at your home is not the same as renting your home to your S-corp for a business meeting).

Fair market rent — this is not optional

The IRS requires that you charge your business the fair market rent — what an arm's-length landlord would charge for comparable space in your area for the same use. Charging $10,000/day for a one-bedroom apartment in a rural area will not survive audit. Charging $1,500/day for a 4,000-square-foot home with a dedicated conference room in Manhattan might be very defensible.

How to establish fair market rent:

1. Get three comparable quotes for venue rentals in your area (hotel meeting rooms, executive suites, event spaces) for the same duration. Courts have accepted this methodology.
2. Document the comparables at the time of the rental — printed or PDF copies of the quotes with date stamps.
3. Set your rent at or below the median of your comparables. Pricing above comparables invites scrutiny.

For most markets, $500–$2,500 per day is a defensible range for a home with dedicated meeting space. At 10 days per year, that's $5,000–$25,000 in tax-free income and a matching business deduction.

Tax savings estimator

How to set it up (step-by-step)

Step 1 — Establish the rental agreement before the first rental day

Draft a simple written lease between you (as homeowner) and your S-corp (as tenant). Include the rental rate, the permitted use (business meetings, strategy sessions, etc.), the address, and the term. Date it and sign it in your capacity as both homeowner and as an officer of the S-corp, noting the dual-role.

Step 2 — Document each rental event

For each rental day, create and keep:

• A meeting agenda with date, attendees, and business purpose
• Meeting minutes or notes (even a one-page summary qualifies)
• An invoice from you to the S-corp for that day's rent
• Evidence of payment (check, ACH transfer, or credit to your shareholder loan account)

Step 3 — Price the rent with comparables

Obtain quotes for equivalent meeting space in your area on the rental date. Save the quotes as PDFs. Set your rate at or below market. Update the comparables annually — rental markets change.

Step 4 — Book it correctly on both returns

Your S-corp: record the rent payments as a deductible business expense (meeting/venue rental). Your personal return: do not report the income — §280A(g) excludes it entirely. You don't even need a Schedule E entry.

Who benefits most

The Augusta Rule delivers the biggest return for owners in high tax brackets (32–37%) with a home suitable for legitimate business meetings. Specific profiles where this strategy shines:

• S-corp consultants and service businesses with a home office used for client meetings — 10–14 days is easy to document naturally over the course of a year
• Partnerships with multiple members — a partners' annual meeting or retreat at one member's home qualifies
• Family S-corps where multiple family members serve as officers — annual shareholder meetings, quarterly reviews, training days all count
• High-net-worth business owners who already use other S-corp strategies (accountable plan, reasonable salary optimization, solo 401(k)) and want to add another layer

Limitations and common mistakes

Don't exceed 14 days

The exclusion is binary. At 15 days you lose the benefit on all income, not just the marginal day. Keep a log and stop at 14. Most owners doing this correctly hit 10–12 days naturally — board meetings, a strategy weekend, and quarterly check-ins.

Sole proprietors and SMLLCs can't use this

If you're a sole proprietor or a single-member LLC taxed as a disregarded entity, you and the business are the same taxpayer. There's no valid rental — you'd be paying rent to yourself, from yourself. The IRS and Tax Court have rejected these attempts. You must have a separate legal entity (S-corp, C-corp, or partnership) for the rent to be a deductible business expense.

The rent must be arm's-length

Inflating the daily rate to maximize the benefit will attract IRS scrutiny and can result in the entire strategy being disallowed. Use market comparables and document them.

Don't mix it with your home office deduction

If you take a home office deduction on the same space, there's potential overlap. The home office deduction (Form 8829 or simplified method) applies to your regular and exclusive business use of the space throughout the year. The Augusta Rule rental is a separate, distinct event — a specific rental of the home to the business for a specific purpose. Most tax advisors recommend you don't mix the methodologies for the same space, and some suggest only using the Augusta Rule if you're not also claiming the home office deduction, to avoid the argument that the space is already being treated as business use and therefore isn't truly a "residence" under §280A. Get guidance specific to your setup.

This is not for everyone — get professional advice

The Augusta Rule is a legitimate, IRS-acknowledged strategy, but the documentation and pricing requirements make it implementation-sensitive. A fee-only financial advisor working alongside your CPA can help you determine whether it fits your entity structure, how to price the rental, and how to document it correctly before your first use.

How it stacks with other S-corp strategies

The Augusta Rule is one of several S-corp-specific planning tools. A well-advised S-corp owner typically layers multiple strategies:

• Reasonable salary optimization — reduce FICA exposure by calibrating your W-2 salary correctly
• Accountable plan — reimburse home office, vehicle, phone, and professional expenses tax-free through the corporation
• Augusta Rule (this page) — convert personal residence rental income to tax-free dollars while the corporation deducts the payment
• Solo 401(k) or cash balance plan — shelter $72K–$300K+ of income per year in pre-tax retirement vehicles
• QBI deduction — optimize the 23% pass-through deduction by managing W-2 wages and UBIA above the threshold

These strategies compound. An S-corp owner at $400K net income who implements all five layers can realistically shelter $150K–$250K of income from federal tax annually — savings that dwarf the cost of a competent financial advisor and CPA working in coordination.