Augusta rule: how the Section 280A tax rule works in 2026

By Preston Seo, founder of Legacy Investing Show. Last reviewed October 22, 2026. Change log: Oct 22, 2026 added how the rule works step by step, the forms the business and the owner file, what an audit checks, what the rental agreement and minutes should say, and FAQs on LLCs, the dollar limit and Section 280A. Oct 6, 2026 rewrote the page, corrected the savings math for S corporation owners, added the 2026 $2,000 Form 1099 threshold, the Sinopoli case, video, and IRS links.

What is the Augusta rule?

Section 280A(g) of the tax code says that if you rent out a home you live in for fewer than 15 days in a year, you leave that rent out of your income. You also cannot deduct any rental costs for those days. People call it the Augusta rule because homeowners in Augusta, Georgia rent their houses to visitors during the Masters golf tournament each April.

The rule works for anyone who rents a home they live in for a few days, such as during a big event. Business owners use it in a second way. Their company rents the home for real business meetings, pays a fair rate, and deducts the rent as a business expense under Section 162. The owner receives the rent tax-free.

Section 280A as a whole limits tax deductions for a home. Subsection (c) covers the home office, subsections (d) and (e) cover a vacation home you also rent out, and subsection (g) is the 14-day rule people call the Augusta rule.

Who can use the Augusta rule?

You need all of these

• You own a home you use as a residence. It can be your main home or a second home you use personally.
• The business that pays is a separate taxpayer: an S corporation, a C corporation, or a partnership. A sole proprietorship or a single-member LLC taxed as one cannot rent to you, because you would be paying yourself.
• The total rental days for the year are 14 or fewer, counting every renter, not just your business.
• Each day has a real business purpose that the business would otherwise pay a venue for.
• The rate matches what comparable spaces near you charge, with written proof.
• The money really moves from the business account to you, with a rental agreement and an invoice.

Who this does not work for

• W-2 employees with no business of their own. An employer will not pay rent for your living room.
• Sole proprietors and single-member LLCs taxed as sole proprietors.
• Owners who already claim a home office deduction on the same space. One says the space is your business place and the other says it is your residence rented for a few days.
• Anyone who cannot show real meetings with agendas, attendees, and notes.
• Owners who want to charge far more than local venues. Inflated rates are what courts cut.

You can also use the rule with no business at all. If you rent your home to visitors during a big local event for 14 days or fewer, you keep that rent tax-free. A business is needed only for the version where your company pays you the rent.

How does the Augusta rule work, step by step?

1. Check the business type. It must be an S corporation, a C corporation, or a partnership. A multi-member LLC is a partnership by default. A single-member LLC works only if it elected S or C corporation tax.
2. Plan the days. Keep the total for the year at 14 or fewer, counting every renter. Many owners plan 12 to leave room for a mistake.
3. Set the rate. Get three or more dated quotes for similar meeting space near you, for the same group size and hours.
4. Sign a rental agreement between you and the business before the first meeting.
5. Hold a real meeting with an agenda, the people who attend, and minutes that record the decisions.
6. Send an invoice and get paid from the business bank account to your personal account.
7. Let the business deduct the rent on its return, and send you a Form 1099-MISC if it paid you $2,000 or more in 2026.
8. Leave the rent off your personal return and keep the whole file for at least three years after the return is filed.

How much can the Augusta rule save?

These are examples, not forecasts. They assume an S corporation owner in the 35% federal bracket with a 5% state tax, so each dollar of business profit costs about 40 cents in income tax.

How the S corporation math works: the rent lowers the company's profit, and that profit would have reached your personal return on a K-1. So the saving is the rent times your tax rate, one time. Some explanations add the company's deduction and the tax-free rent together. For an S corporation owner that counts the same dollars twice. For a C corporation the saving can be larger, because the deduction saves corporate tax and the cash reaches you without a dividend.

Two more checks. If you take the QBI deduction, lowering S corporation profit also lowers that deduction a little, so the real saving is slightly smaller. And the rent is not wages, so it does not count toward a solo 401(k) or Social Security. Use the Augusta rule meeting log and rent calculator to run your own days and rate.

How do you set fair market rent?

The rate is where most cases are won or lost. Get at least three quotes for spaces like yours, in your area, for the same size group and length of time: hotel meeting rooms, event venues, coworking rooms, or listing sites for meeting space. Save screenshots with dates.

Price what the business actually uses. A four-person planning meeting does not need the rate for a 50-person event hall. If local meeting rooms run $400 a day, $500 for a nicer home with catering space is easy to defend. $5,000 is not.

The Tax Court case Sinopoli v. Commissioner, T.C. Memo. 2023-105, shows what happens when this is skipped. An S corporation paid its owners $3,000 a month each to hold meetings at their homes and deducted more than $290,000 over three years. The owners had no comparable rates and notes for only some of the meetings. The court allowed $500 per documented meeting, about $10,500 in total.

What records should you keep?

1. A written rental agreement between you and the company, signed before the first rental, with the rate, the dates, and the purpose.
2. Proof of fair rent: the three or more dated comparable quotes.
3. An agenda, an attendee list, and minutes for every meeting, with the decisions made.
4. An invoice from you to the company for each rental.
5. Payment from the business account to your personal account, with a memo such as "Section 280A rental, March 14 board meeting."
6. A Form 1099-MISC if the company pays you $2,000 or more of rent in 2026. The threshold was $600 before 2026. You still do not report the rent as income.
7. A day count that includes every rental of the home that year, from any renter.

What the rental agreement should say

• Your name as owner and the business as the renter.
• The address and the rooms the business uses.
• Each date, or the dates planned for the year.
• The day rate, and a note that it is based on the attached venue quotes.
• The business purpose, such as quarterly planning or a board meeting.
• When and how the business pays, and both signatures.

What the meeting minutes should say

• The date, the start time, and the end time.
• Who attended and their role in the business.
• The agenda items covered.
• The decisions made and who does what next.

The Augusta rule meeting log and rent calculator keeps the day count, the rate, and a log of each meeting in one place.

How do you report Augusta rule rent on your tax return?

The business and the owner file different things. Line numbers can move from year to year, so check them against the current form.

Form 8825 is not part of this. A partnership or an S corporation uses Form 8825 for rental real estate it owns and rents out. Here the business is the tenant. Schedule E is not used for the rent either, because IRS Publication 527 says not to report rent from a home rented fewer than 15 days.

One practical point. If the business sends you a Form 1099-MISC, the IRS has a record of rent paid to you that your return does not show. Ask your CPA how they want to handle that on your return, so you do not get a letter asking about it.

Does the Augusta rule raise audit risk?

The rule is in the tax code, so using it is allowed. What an examiner checks is whether your facts fit it. Expect to be asked for:

• The signed rental agreement.
• The dated venue quotes behind your rate.
• An agenda, an attendee list, and minutes for every day you charged.
• Proof the business paid you, day by day.
• A day count for the whole year, from every renter.
• A reason the meeting was held at your home and not at the office.

Sinopoli shows what happens when these are thin. The court allowed rent only for the meetings that had records, and at a rate it set itself. It also said that the rent must still be an ordinary, necessary and reasonable business expense, even when the owner leaves it out of income under Section 280A(g). When a deduction is cut, the IRS can also add a 20% accuracy-related penalty on the tax that was underpaid, under Section 6662.

What does our own data show?

Of the 61 wealth plans we published between August 2025 and April 2026, 24 mention the Augusta rule. One plan dated April 11, 2026 used a $500 day rate for 14 days, or $7,000 of rent. Plans are planning scenarios, not results, and names are left out.

What does Preston say about this on video?

How to Pay $0 Tax on $100K+ Using the Augusta Rule (14-Day Loophole Explained) (9 min, March 2026). Preston explains Section 280A(g), the 14-day limit, why the business must be a separate entity, how to set fair market rent from comparable venues, the paperwork to keep, and why the Augusta rule and a home office deduction on the same home do not mix well. Watch on YouTube.

Two notes on the video. It mentions a Form 1099 for rent over $600. For rent paid in 2026 the threshold is $2,000. It also adds the business deduction and the tax-free rent into one combined figure. For an S corporation owner, use the one-sided math in the table above.

Can you use the Augusta rule and a home office deduction together?

Not on the same space. The home office deduction needs space used regularly and only for business. The Augusta rule rents a residence you use personally. If you have a dedicated office room and also host meetings in your living and dining rooms, some CPAs will support both for different spaces. Ask yours before you try it.

For most owners with a decent-sized home, the Augusta rule gives the larger number. The simplified home office method caps out at $1,500 a year ($5 per square foot on up to 300 square feet).

What mistakes cause problems?

• Going to 15 days. Day 15 makes all of the year's rent taxable, not just the extra day. A two-hour meeting counts as a full day.
• Renting through a sole proprietorship. There is no separate party to pay you.
• Rates far above local venues, which is what sank Sinopoli.
• Family events called meetings. A birthday party with an agenda written later will not hold up.
• Journal entries with no money moving. The business must actually pay you.
• Forgetting other renters. Renting the house on a vacation site for a weekend uses up days too.
• Skipping the Form 1099-MISC when the business pays you $2,000 or more in 2026.

What if you rent the home for more than 14 days?

Then the Augusta rule does not apply, and all of the rent for the year is taxable. You report it on Schedule E and split your costs between personal days and rental days under the vacation home rules in Section 280A(d) and (e).

If you own a separate property that you rent to guests for short stays, two other rules matter more. The short-term rental tax loophole can let a rental loss offset W-2 pay when the average stay is 7 days or less and you materially participate. For long-term rentals, the route is real estate professional status.

What changed for 2026?

• The Form 1099-MISC threshold for rent rose from $600 to $2,000 for payments made after December 31, 2025, under the One Big Beautiful Bill Act.
• Section 280A(g) itself did not change. The limit is still fewer than 15 days.

Related reading: Section 280A and business use of your home, the S-corp election for high earners, and 7 money moves CPAs rarely mention. The tax strategy library lists every guide.

Which IRS sources back this up?

Read the rule itself before you rely on a summary, including this one.

• Internal Revenue Code Section 280A, including 280A(g)
• IRS Publication 527, Residential Rental Property (homes rented fewer than 15 days)
• IRS Topic 415, Renting residential and vacation property
• IRS Publication 587, Business Use of Your Home
• IRS Publication 535, Business Expenses
• IRS Form 1099-MISC
• IRS Form 1120-S and instructions
• IRS Form 1065 and instructions
• IRS Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation
• Internal Revenue Code Section 6662, accuracy-related penalty