The Augusta Rule: How to Rent Your House to Your Own Business—Tax-Free

Michael Wedaa

Sep 4

3 min read

Here’s one of those tax strategies that sounds like it was invented by a guy sitting at a bar trying to figure out how to pay less in taxes. It wasn’t. It’s actually in the tax code.

And it can be incredibly useful for business owners. It’s called the Augusta Rule, and it comes from IRS Section 280A(g).

Here’s the basic idea:

You can rent your personal residence to your business for up to 14 days per year. Your business can potentially deduct the rental expense. And the rental income you receive personally can be excluded from your taxable income. Yes, you read that correctly.

Your business pays you rent. Your business gets a deduction. And, if you meet the requirements, the rental income doesn't have to be reported as taxable income on your personal return.

Sounds a little too good to be true, right?

How Can a Business Owner Use It?

Let's say you own a corporation and you normally work from your home.

Instead of holding every meeting at a coffee shop, restaurant, or rented conference room, your company could potentially rent your home for legitimate business purposes.

For example:

Annual strategy meetings
Board meetings
Employee training
Management retreats
Planning sessions
Company workshops
Client meetings
Business presentations

Let's say your company rents your home for 8 legitimate business meetings during the year. You charge the business $1,000 per day.

That's: $1,000 × 14 days = $14,000

Your business potentially deducts the $14,000 rental expense.

And because you're staying within the 14-day limit, the rental income can potentially qualify for the Section 280A(g) exclusion.

So, conceptually:

Business deduction: $14,000

Personal taxable rental income: $0

That's a pretty interesting transaction. But—and this is a BIG but—you don't get to simply write a check from your business to yourself and call it a tax strategy.

You Have to Make It Legit

This is where people get themselves into trouble. The IRS doesn't care that you watched a TikTok video telling you about the Augusta Rule. You need to be able to demonstrate that the rental actually happened and that the amount you charged was reasonable.

Think about it like a real business transaction. Have a legitimate business purpose. Document the meeting. Create an agenda. Keep meeting minutes. Document who attended and what was discussed. Keep the rental agreement. Keep records of the dates and the amount paid.

And most importantly, use a reasonable rental rate.

If comparable properties on Airbnb in your area rent for $300 per day, you probably shouldn't decide your three-bedroom suburban house is suddenly worth $4,000 per day because your business is picking up the tab.

That's not a tax strategy. That's creating an invitation for questions.

If you can support a $1,000 daily rental rate with comparable properties, event-space rates, or other reasonable market data, that's a very different story.

What About LLCs?

This is another area where business owners need to pay attention. The tax treatment of an LLC depends on how the LLC is taxed. An LLC isn't automatically a corporation for federal tax purposes.

Depending on its tax classification, the Augusta Rule may or may not work the way you're expecting. For example, an LLC taxed as an S corporation or C corporation can potentially be in a position to use this strategy, while a single-member LLC disregarded for federal income tax purposes presents a very different situation.

That's why this is one of those strategies where your entity structure matters. And that's actually the bigger lesson.

The Bigger Business Rogue Lesson

Most business owners think about tax deductions like this:

“What can I buy that I can deduct?”

That's the wrong question.

A better question is:

“How can I structure legitimate business activities so that money I'm already spending—or could reasonably spend—is handled more efficiently?”

Your house is an asset. Your business needs places to hold meetings. Those two facts can sometimes work together.

The Augusta Rule is just one example of how the right business structure can create opportunities that most business owners never think about. But don't confuse a clever tax strategy with a license to manufacture expenses. The transaction needs to be legitimate. The business purpose needs to be real. The documentation needs to exist. And the numbers need to make sense.

Tax strategy isn't about making up deductions.

It's about understanding the rules well enough to stop leaving legitimate opportunities on the table. And sometimes, one of those opportunities is sitting right in your own backyard.

This article is for educational purposes only and is not tax, legal, or accounting advice. Section 280A(g) has specific requirements and limitations, and your ability to use this strategy depends on your individual circumstances and tax structure. Consult your CPA or qualified tax professional before implementing it.