Article
No, you don't.
When both spouses each own their own business, it’s natural to assume the Augusta Rule doubles. Each of you has a company, each company holds meetings, and each company could rent your home. So it seems like that should add up to 28 days.
The Augusta Rule doesn’t work that way. Here’s how the 14-day limit applies when you and your spouse both own a business, and what you can do to make full use of it.
The 14-day limit belongs to the residence
The Augusta Rule, Section 280A(g) of the tax code, lets you rent your residence for up to 14 days a year without being taxed on that rental income. When you rent your home to your own business for legitimate business meetings, the business can deduct the rent at fair market value.
The limit is counted per residence. The number of businesses doesn’t change it, and neither does the number of owners. Your home gets 14 tax-free rental days a year in total, whether one company rents it or several do.
Split the 14 days between your companies
Both of your businesses can rent your home, but they share the same 14 days.
For example, your company might hold 8 days of meetings during the year and your spouse’s company might hold 6. Together that’s 14, which keeps the home within the limit.
Each company needs to handle its own rentals properly:
- A rental agreement between the company and the homeowner
- A fair market rental rate
- A real business purpose for each meeting
- Meeting notes describing what took place
Each company’s rental days, payments, and records stay with that company.
Use a second residence if you have one
The 14-day limit applies to each residence separately. If you have a vacation home or another place you live part of the year, it gets its own 14 days, as long as you use it personally for at least 15 days during the year.
If you rent that property on a short-term rental site for part of the year, those days count toward its 14 tax-free days as well. Be sure the total across all rentals doesn’t go over 14.
With two qualifying residences, you could rent each one for up to 14 days tax-free. You could also combine both options, so each company rents each home for part of that home’s 14 days.
For tax professionals and financial strategists
Married clients who each own a business sometimes count rental days by entity instead of by residence. That can push a home past 14 days without anyone noticing until the return is prepared.
When you review a client’s plan, ask how many residences qualify and which entities are renting them. Then make sure the combined rental days for each home stay at 14 or fewer. It’s also a good time to confirm whether a vacation home has outside rental days that count toward its limit (e.g. if the home was rented to a 3rd party on a short-term rental site).
The short version
- The Augusta Rule allows 14 tax-free rental days per residence each year, no matter how many businesses rent it.
- Spouses with separate businesses can split those 14 days between their companies.
- A second qualifying residence gets its own 14 days.
- Each company needs its own rental agreement, fair market rate, business purpose and meeting notes.
