Article
This is a common question when business owners start looking at the Augusta Rule, formally IRS Section 280A(g).
The short answer is no, a bookkeeping entry alone is not enough. A real payment has to occur.
Here’s why.
Why you must actually pay yourself
The IRS expects an actual economic transaction to take place. In practical terms, that means:
- Money must move from the business to you as the homeowner
- The payment must reflect fair market rental value
- You need proof that the payment occurred, such as a check, bank transfer, or receipt
A journal entry or internal accounting adjustment does not meet that standard.
If no money changes hands, there is no real rental expense. And without a real expense, there is nothing for the business to deduct. The IRS does not recognize phantom transactions.
What proper payment looks like
To do this correctly, the transaction should mirror how your business would rent space from any third party venue.
That includes:
- A written rental agreement between you, as the homeowner, and your business
- Clear documentation of the business purpose of the meeting or event
- A fair market rental rate supported by contemporaneous comparables
- An actual payment from the business to your personal account for each event
- Retained supporting records, including rental valuations, invoices, meeting minutes, rental agreements, and proof of payment
Each qualifying event stands on its own. These steps are not one-time setup items; they must be completed for every rental event.
The reality
Could you technically handle all of this yourself? Yes. And you may already be doing it.
What clients consistently tell us is how much time it saves to no longer handle the documentation, valuation comps, and record keeping on their own. We do that work for them, using the same standards outlined above.
Book a free strategy call to see what this looks like for you. We’ll walk through your numbers, outline the savings, and cover how the process is handled end-to-end so you can start keeping more of your time and money.
