What Is the Augusta Rule? Renting Your Home to Your Business

“Augusta rule” is shorthand for one provision of the tax code, section 280A(g). It is an exclusion for the person renting out a home they live in, not a deduction, and it says nothing about who the tenant has to be. Whether the tenant can deduct the rent is a separate question. Put together, the two sides make a planning idea for owners who hold business meetings at home, and the Tax Court has ruled on arrangements built that way. This guide covers what the statute says, what a business needs to deduct the rent, how it works for each type of entity, what the court decided and the records that matter.

What IRC 280A(g) says

Section 280A(g) applies when a dwelling unit is used during the year as a residence and is actually rented for less than 15 days. Two things follow for that year: no deduction is allowed because of the rental use, and the income from it “shall not be included in the gross income” of the person renting it out. Three conditions have to be met:

• A dwelling unit. The code defines it as “a house, apartment, condominium, mobile home, boat, or similar property, and all structures or other property appurtenant to such dwelling unit” (IRC 280A(f)(1)(A)). A vacation home counts (Publication 527).
• Used as a residence. You use it for personal purposes on more days than the greater of 14 days or 10% of the days it is rented at a fair rental (IRC 280A(d)(1)). A main home you live in meets this easily.
• Rented fewer than 15 days. The statute counts the days the home is actually rented during the year, to anyone. At 15 days or more, Publication 527 says to include all the rental income and divide your expenses between rental and personal use.

On the owner's return, Publication 527 says a home used as a home and rented less than 15 days “shouldn't be reported on Schedule E,” and that mortgage interest, property taxes and any qualified casualty loss are “reported as normally allowed on Schedule A.”

The two sides are tested separately. The exclusion asks only whether the home was a residence and how many days it was rented; in Roy, the Tax Court noted that section 280A(g) “contains no requirement that the dwelling unit be rented at fair rental value.” Whether the price was right is a question for the business's deduction.

What your business needs to deduct the rent

The business deducts rent under section 162, which allows the ordinary and necessary expenses of carrying on a trade or business, including “rentals or other payments required to be made as a condition to the continued use or possession” of property used in the business (IRC 162(a)(3)). Three questions decide it:

1. Is it a real business use? A meeting, training day or similar event with a business purpose you can show. Section 162 covers only the expenses of carrying on the business.
2. Is the amount reasonable? “Only the portion of an expense that is reasonable qualifies for deduction under section 162(a),” the Tax Court said in Jadhav, and the reasonableness concept “has particular significance in dealings between related parties” (Sinopoli).
3. Is it rent at all? In Jadhav the court framed the basic question as “whether the payments were in fact rent and not something else disguised as rent.”

For the price, Publication 527 defines a fair rental price as “the amount of rent that a person who isn't related to you would be willing to pay,” and says to compare properties on purpose, size, condition, furnishings and location. For a business meeting, the comparable is meeting space: a hotel conference room, a coworking room or an event space nearby of similar size. In Sinopoli, the IRS agent priced local meeting space at about $500 for a full or half day and allowed that amount for each meeting the owners documented.

Illustration only, with hypothetical round numbers: an S corporation holds four all-day planning meetings a year at the owner's home, with an agenda and minutes for each, and quotes for comparable meeting rooms nearby run about $400 a day. The corporation pays $1,600 from its bank account under a written agreement. Its deduction turns on whether the meetings were ordinary and necessary and the rent reasonable; the owner can exclude the $1,600 because the home was rented for 4 days. Compare the sums in the cases below.

How the Augusta rule works for each type of business

The exclusion belongs to the person renting out the home. Whether there is a tenant whose rent is deductible depends on how the business is taxed:

The S corporation point needs care. Section 280A(a) denies deductions “with respect to the use of a dwelling unit which is used by the taxpayer during the taxable year as a residence,” and it applies to a taxpayer “who is an individual or an S corporation.” Section 280A(f)(2) then treats a shareholder's personal use as the corporation's for the residence test. We found no IRS guidance or court decision on how that interacts with rent paid for a shareholder's home, so it is a question to put to your preparer before the corporation relies on the deduction.

Rent pays for the use of property. It does not replace the reasonable salary an S corporation owes a shareholder who works in the business, which is covered in S corp vs LLC.

What the Tax Court has said

Three decisions show where the lines are. The first two involved S corporations renting their owners' homes for meetings; the third involved an employer renting part of an employee's property all year.

The two recent cases share a pattern: neither business had an appraisal, and neither could support its rate. In Sinopoli, the court noted that the owners “have not presented any written documentation such as minutes, agendas, or calendars” and found their testimony about the meetings “vague and unconvincing,” so it allowed rent only for the meetings it could confirm. It also agreed with the IRS that the owners seemed to have adopted “a tax savings scheme to distribute Planet's earnings to petitioners through purported rent payments.” No penalties had been determined in that case.

In Jadhav, the planning firm had itself advised a daily rate “supported by independent comparables” and suggested an appraisal. The owners used the firm's assumed rates instead, and the court wrote that they “have not provided any expert testimony or other evidence of their properties' fair rental values.” With no basis to estimate a fair rent, it allowed none. It also sustained accuracy-related penalties and rejected the owners' reliance on their CPA as reasonable cause, because they had not shown they gave the CPA all the relevant information, including the rental values of their properties.

Roy is older and different in kind, but it marks the day-count edge. Monthly payments for storage and for the use of roads and parts of the home were income from the “rental of their dwelling unit for the entire year,” which took the owners out of section 280A(g). The court also applied section 280A(c)(6): “There shall be no deduction for expenses attributable to the rental use of a personal residence by an employee when the property is rented to the employee's employer.” For an owner who works as an employee of the corporation, that is the risk of crossing 14 days: rent that becomes taxable, possibly with no deductions to offset it.

Augusta rule documentation: the records that answer an examiner

Every taxpayer has to keep records “sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown” on a return (Treas. Reg. 1.6001-1(a)). For a rental between an owner and the owner's own company, the cases show which questions the records have to answer:

Common mistakes with the Augusta rule

• Renting the home 15 days or more in the year, counting every tenant. The exclusion is gone for that year, and Publication 527 then treats all the rent as income.
• Paying monthly “rent” all year for partial use of the home or land, as in Roy. That is a full-year rental, not a 14-day one.
• Pricing a living room like an event venue, or charging for the whole house when the meeting used one room. In Sinopoli the court noted that “only small portions of the residences were used for the meetings.”
• Using a planner’s projected rate instead of real comparables, as in Jadhav.
• Billing the business for gatherings that are personal, such as family events. Section 162 covers only the expenses of carrying on the business.
• Treating the rent as a way to move profit out of the company. The court in Sinopoli agreed with the IRS that the owners seemed to have adopted “a tax savings scheme to distribute Planet’s earnings to petitioners through purported rent payments.”

Augusta rule vs the home office deduction

They answer different questions. A home office is a part of the home “exclusively used on a regular basis” for the business, for example as the principal place of business or a place to meet clients (IRC 280A(c)(1)). The Augusta rule is about renting the home, or part of it, for a few days. Occasional meetings in a living room do not turn it into a home office. When a company pays back an owner-employee for business costs the owner covered personally, that runs through an accountable plan, not through rent.

Reporting: the owner's return and Form 1099

On the owner's side, Publication 527 says rent from a home used as a home and rented less than 15 days is not included in income and does not go on Schedule E. On the business side, the rent is deducted on the business return like other rent if it passes section 162. The Form 1099-MISC instructions call for reporting rents of $2,000 or more paid in the course of a trade or business in box 1, for tax years beginning after 2025, and they do not mention section 280A. How the two returns line up is worth settling with the preparer before the first payment.

Sources: 26 U.S.C. 280A, including 280A(g), special rule for certain rental use; 26 U.S.C. 162, trade or business expenses; 26 U.S.C. 707, transactions between partner and partnership; Treas. Reg. 301.7701-2, business entities; Treas. Reg. 1.6001-1, records; IRS Publication 527 (2025), Residential Rental Property; IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026); Sinopoli v. Commissioner, T.C. Memo. 2023-105; Jadhav v. Commissioner, T.C. Memo. 2023-140; Roy v. Commissioner, T.C. Memo. 1998-125. Rules, cases and figures checked against these sources on September 25, 2026. This is general information, not tax advice for your situation. Tax services are provided by licensed tax professionals under a separate engagement agreement. BEG does not provide tax advice.