The Augusta Rule for S-Corp Owners: Renting Your Home to Your Business Under §280A(g)

A marketing consultant who runs her business through an S-Corp holds four planning meetings a year at her house. She read that she can charge her own company rent for the space, tax-free, and she wants to know if that is real or something a TikTok tax guru made up. It is real, it lives in the code, and it has a nickname. The owner here is theoretical, not an actual EntityIQ client, but the rule she is asking about applies to any S-Corp owner who does legitimate business at home.

What the statute actually says

The Augusta Rule is the nickname for IRC §280A(g). It says that if you use a dwelling as a residence and rent it for fewer than 15 days during the year, the rental income is not included in your gross income under §61, and you cannot deduct expenses tied to those rental days. The name comes from homeowners near Augusta, Georgia, who rented their houses during the Masters golf tournament and kept the money tax-free. The rule is not limited to golf towns. It applies to any residence you also use personally, including your primary home.

You can rent the home for up to 14 days in a tax year and still exclude the income. The statute uses the phrase fewer than 15 days, so day 15 breaks the exclusion. If you rent for 15 days or more, all of the income becomes taxable and the deal loses its point.

Why an S-Corp is what makes it work

The strategy needs a separate taxpayer on the other side of the lease. A sole proprietor and a single-member LLC that is a disregarded entity are the same taxpayer as the homeowner, so paying rent to yourself does nothing. An S-Corp, a partnership, or a C-Corp is a separate taxpayer that deducts the rent under IRC §162 while the owner excludes it under §280A(g). That split is the whole point. One dollar leaves the business as a deductible expense and lands with the owner as income that never touches the return.

The §162 side has its own test. The rent has to be an ordinary and necessary business expense that is reasonable in amount. The meeting has to have a real business purpose. A board meeting, a quarterly planning session, an annual strategy day, or a recorded training all qualify if they actually happen. A backyard barbecue with the family does not.

The math on a theoretical year

Say the consultant holds one documented business meeting a month, twelve for the year, and charges a rate she can back up with local quotes. The left card shows a clean version. The right card shows the version the Tax Court took apart. Numbers are theoretical and rounded.

The Sinopoli trap

In Sinopoli v. Commissioner, T.C. Memo. 2023-105, an S-Corp deducted more than $290,000 of rent over three years for meetings at the shareholders' homes. The Tax Court allowed only $16,500. The owners charged roughly $3,000 a month with no independent support for the rate, and they had no minutes, agendas, or calendars for most of the meetings. The court repriced the substantiated meetings at $500 each and disallowed the rest. It sustained twelve meetings in 2016 and nine in 2017, and it allowed nothing for 2015 because there were no records at all.

Read the opinion and the pattern is clear. The court did not say the Augusta Rule is a scam. It said the taxpayers picked a number that was not tied to the market and could not prove the meetings happened. Both failures are avoidable with a folder and an afternoon.

How to do it defensibly

Set the rate from the market, not from what you wish it were. Gather written quotes from three comparable venues in your area, a hotel meeting room, a coworking conference room, an event space, and keep the quotes in your file with the date and source. Sign a short rental agreement between you and the S-Corp for each date that lists the space, the hours, and the rate. Keep the day count at 14 or fewer. Pay by check or transfer from the business account, and hold an actual meeting with an agenda, notes, and an attendee list. That last piece is what the Sinopoli owners could not produce.

The reporting mechanics trip people up. Payments to a corporation for rent generally do not trigger a Form 1099-MISC, but here the S-Corp is paying an individual homeowner, so a 1099-MISC for rents can apply if the total is $600 or more. Under IRS Topic 415, a home rented for fewer than 15 days is not reported on Schedule E at all. If a 1099-MISC does get issued, the common fix is to report the amount on Schedule E and back it out with an offsetting entry that references the §280A(g) exclusion so the return nets to zero and avoids a matching notice.

What it is worth, honestly

The deduction shifts income the S-Corp would have passed through to you into money you never report. At a documented $9,600 for the year, an owner in a 24% federal bracket with a 5% state rate saves somewhere between $2,300 and $2,800, depending on whether the §199A qualified business income deduction would have applied to that income. That is a nice result for holding meetings you were going to hold anyway. It is not a way to pull tens of thousands of dollars out of your company tax-free, and any promoter who tells you otherwise is describing the losing side of the Sinopoli case.

The Augusta Rule is one lever among several for an S-Corp owner. It pairs well with an accountable plan for your home office and mileage, and it sits downstream of the bigger decision, which is setting a defensible reasonable salary and understanding how your salary drives the QBI deduction. If you have not run the numbers on whether the S-Corp election itself pays off for your profit level, start with the EntityIQ S-Corp tax calculator before you worry about the home rental.

This article is educational and is not legal or tax advice. The figures above are theoretical and rounded, and the consultant is not a real client. Please consult a qualified CPA or EA before charging your business rent.