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What is the Augusta Rule?
The Augusta Rule is a provision in the U.S. tax code (IRC Section 280A(g)) that lets a taxpayer rent out their residence for 14 days or fewer per year without paying taxes on the rental income. It’s not a loophole. It’s in the law.
A few rules that come with it:
The IRS defines “residence” as a property where you sleep at least 14 days per year and that contains a bedroom, bathroom, and kitchen. Your primary home qualifies. So can a second home or vacation property if it clears that threshold.
You can rent out your residence for up to 14 days each year, and the income is tax-free. Cross the 14-day line and it backfires: rent for 15 or more days in a calendar year and all of the rental income for that year becomes taxable, including the first 14 days. There’s no partial credit.
You’re also not limited to one property. Each qualifying residence can be rented for up to 14 days per year, tax-free. For example, three properties means up to 42 tax-free rental days across your portfolio (14 per residence).
Most people who’ve come across it have heard about homeowners in Augusta, Georgia renting to Masters Golf Tournament fans for a week and pocketing the money tax-free. Or doing a handful of weekends on a short-term rental website. Those are real applications of the rule. But it’s only part of what the rule actually allows. We use 1.0 and 2.0 to separate what most people have heard about from what most people haven’t.
Augusta Rule 1.0 –
Rent Your Home to a 3rd Party
The tax code says that if you rent your residence for fewer than 15 days in a calendar year, the income is excluded from your gross income entirely. It doesn’t specify who you can rent to. A stranger, a friend, a golf fan, it doesn’t matter.
That’s what most people know and how most people use it. We call it 1.0, just to give it a name.
Solid. But if you own a business, there’s more.
Augusta Rule 2.0 –
Rent Your Home to Your Own Business
The same section of the tax code. The same 14-day max. The same tax-free exclusion.
The difference is who you rent to.
Instead of a third party, you rent your home to your own business for legitimate business purposes. Your business pays you a fair market rental fee. You collect that income tax-free. And your business deducts the rental expense.
We call this 2.0. Again, that’s just our way of naming it, not a legal term.
The outcome is meaningfully different for business owners because you’re getting two benefits from one transaction. Your business reduces its taxable income. You receive personal income that isn’t taxed.
It’s one of the few legal strategies that moves money from your business to your personal pocket without the IRS collecting on either end.
What Businesses Qualify?
Not every business structure works. The IRS disqualifies businesses where the owner and the business are treated as the same taxpayer.
Eligible:
- S corporations and C corporations
- Multi-member LLCs (non-spousal)
- Non-spousal partnerships with a distinct EIN
- LLCs taxed as an S-corp or C-corp
Gray area:
- LLCs or partnerships comprised solely of a married couple
Not eligible:
- Sole proprietorships
- Standard single-member LLCs
If you’re unsure where your business falls, that’s worth a quick check and we’re happy to go over that with you. Send us a quick message sharing your business setup through our Contact form and we’ll let you know.
What It Actually Takes to Do This Right
Renting your home to your business isn’t as simple as hosting a call from your kitchen and writing yourself a check. The IRS expects real documentation, real meetings, and real numbers. You’ve moved into the area of business tax deductions, so having the proper documentation is necessary.
The rental must be for a legitimate business purpose. Dinner with your spouse where nothing work-related gets discussed doesn’t qualify. The meeting needs substance – think an annual business meeting, quarterly business meetings, team training, strategy sessions.
Documentation is non-negotiable. If you can’t prove you followed the rules, the IRS treats it as if you didn’t. That means meeting agendas, written notes, a rental agreement signed before the event, and timely invoicing and payment.
The rental rate has to hold up. The IRS will compare what your business paid you against actual fair-market rates in your area. Your number needs to reflect reality.
Real meetings with real participants. The tax code doesn’t specify a minimum headcount. We recommend having at least three participants per meeting. It’s hard to justify renting a whole house for only two people, and the IRS knows that. A meeting on paper only, with minimal notes and only your spouse in the room, looks easy until it doesn’t hold up in an audit.
Is This Worth the Work?
For most business owners who qualify, yes. The math is straightforward: your business deducts the rental fee, you collect it personally, tax-free. The combined effect can mean tens of thousands of dollars back in your pocket each year. And that’s to say nothing of the investment potential of those tens of thousands per year.
The challenge isn’t understanding how it works. It’s implementing it correctly every time, with documentation that holds up if it’s ever questioned.
That’s what we built The Augusta Rule™ to handle. And the reason we built it at all is worth knowing.
Built by Someone Who Needed It First
Nethaniel Ealy didn’t set out to build a software company. After receiving a tax bill larger than his annual salary, he spent years digging through tax code and talking to CPAs, trying to figure out how to use the Augusta Rule correctly.
He connected with John Hyre, a nationally recognized tax attorney with over 30 years of experience and a track record of defeating the IRS in court. Together they built a structured system that makes it possible for business owners to implement the Augusta Rule correctly, without the paperwork burden and without the guesswork.
How We Handle the Heavy Lifting
Our “Free Money” Plan is a software-backed, done-for-you service. We handle rental valuations, generate contracts and invoices, track your qualifying events, and deliver a CPA-ready report at year-end. You host the meetings and capture notes. We handle the rest.
It starts with a free 45-minute Strategy Call. We’ll estimate your potential savings, confirm whether your business qualifies, and walk you through how the service works.
If you move forward, there’s a $1,000 setup fee, credited toward our 8% fee on the deductions we help you create. Audit defense is included if the IRS does ever come knocking.
