S-Corp Augusta Rule: How to Rent Your Home Tax-Free
The S-corp Augusta Rule lets you rent your own home to your S-corp for up to 14 days a year and keep every dollar of that rent out of your taxable income, while your corporation deducts it as a business expense. It comes from IRC §280A(g), and it works whether you use the house for board meetings, a strategy retreat, or a client event. It also gets abused constantly, and the Tax Court has already told one S-corp owner exactly what happens when it is.
What the rule actually says
Section 280A generally disallows deductions for business use of a home you also live in, and it works the same way in reverse for rental income — normally you’d have to report what someone pays you to use your house. Section 280A(g) is the carve-out: if a dwelling you use as a residence is “actually rented for less than 15 days during the taxable year,” the rent is not included in your gross income under Section 61, and you, as the homeowner, get no deductions attributable to that rental use — the exclusion and the disallowance travel together. The nickname comes from homeowners in Augusta, Georgia renting out their houses during the Masters golf tournament, but the statute has nothing to do with golf — it applies to any homeowner, anywhere, renting to anyone, including their own closely held business.
How the Augusta Rule works with your S-corp
The mechanics are simple on paper. Your S-corp pays you, personally, to use your home for a legitimate business purpose — a quarterly board meeting, an annual planning session, a client dinner. The corporation deducts the rent as an ordinary business expense. You, as the homeowner, exclude the payment from income under §280A(g) as long as the total rental days for the year stay under 15. No W-2, no 1099 wage treatment, no self-employment tax — it’s rent, not compensation, so it sits outside payroll entirely.
That said, the Augusta Rule itself only governs your side of the transaction — whether you have to report the income. It says nothing about whether your S-corp can deduct whatever amount you decide to charge, and that’s where most of the trouble starts.
Why the rent amount is the whole game
Your S-corp’s deduction still has to clear Section 162(a): the expense must be ordinary, necessary, and reasonable in amount, and reasonableness gets particular scrutiny in related-party transactions like this one. The Tax Court already ruled on an S-corp that pushed this too far. In Sinopoli v. Commissioner, T.C. Memo. 2023-105, three S-corp shareholders had their corporation pay each of them roughly $3,000 a month to hold meetings at their homes, deducting $290,900 in rent over less than three years. The IRS researched local meeting-space rental rates and found comparable space went for about $500 a day. The Tax Court agreed, calling even the $500 allowed per month “generous,” and disallowed the rest — on top of throwing out every meeting the shareholders couldn’t actually substantiate with notes, agendas, or a credible account of what business got discussed.
The lesson isn’t that the Augusta Rule doesn’t work. It’s that §280A(g) and §162 are two separate tests, and passing one doesn’t get you out of the other. Price the rent the way an unrelated venue would price it, not the way that maximizes your deduction.
Building a rental rate that survives an audit
Before the first meeting, get two or three quotes for comparable meeting space in your market — a hotel conference room, a co-working space, a small event venue — sized to what you’d actually use in your home. That comparison is your fair rental value, and it’s the number the IRS will build its own comparison around if you’re ever examined. Do this once a year, not once ever, since local rates move and a stale comparison won’t hold up any better than no comparison at all.
Then treat each rental like the S-corp is dealing with an actual landlord: a short written rental agreement for each date, a corporate resolution or minutes noting the business purpose and who attended, and payment from the corporate account to your personal account, not the other way around. Keep a simple log of which 14 (or fewer) days you rented and what happened on each one. This is the same discipline the site already recommends for setting reasonable S-corp compensation — related-party numbers need a third-party anchor, or they’re just a number you picked.
Reporting it correctly on both returns
The income exclusion under §280A(g) doesn’t erase the corporation’s information-reporting duty. Rent your S-corp pays to you as an individual is reportable in Box 1 of Form 1099-MISC once the total for the year hits the filing threshold — which OBBBA raised from $600 to $2,000 starting with 2026 payments, reported in early 2027. Skipping the 1099 because the income is excluded anyway is a common shortcut and it’s the wrong one: the reporting requirement and the income exclusion are independent of each other, and a missing 1099 against a rent deduction on the corporate return is an easy computer-matching flag. On your personal return, the clean way to handle it is to report the rent on Schedule E and then back it out with a §280A(g) adjustment line, so the return shows the payment was disclosed, not hidden.
Where this gets complicated
Fourteen days is a hard ceiling, not a target — day 15 pulls the whole year’s rental income back into gross income, not just the excess. And the reasonable-rent standard from Sinopoli means the right number for your home, in your market, for the specific use you’re making of it, isn’t something a blog post can tell you. It depends on your square footage, your local venue rates, and how much of the space is genuinely dedicated to the meeting versus incidentally used. If you want to add this to your S-corp’s compensation and expense strategy without becoming the next cautionary tax court citation, talk to us before you cut the first rent check.