Tax Strategy Tuesday: Augusta Rule
Written By BEC CFO & CPA
Our BEC Team wanted to share a smart, IRS-approved tax strategy that may be a great fit for your business: the Augusta Rule. It allows you to unlock tax-free income for the business use of your personal home—without spending anything extra. And if you enjoyed the Board of Advisors strategy from last week, there's an added bonus at the end of this email. Here’s what you need to know:
What Is the Augusta Rule?
The Augusta Rule (Section 280A(g) of the Internal Revenue Code) allows you to rent out your personal residence for up to 14 days per year—and exclude that income from your personal taxes. When your business rents your home for meetings or other legitimate business functions, it gets a deduction, and you personally receive tax-free income. This is a clean, legal way to move taxable profit out of your business and into your hands—without creating new expenses.
Why It Matters
Many business owners already host meetings, planning sessions, or events at home, absorbing costs like utilities, cleaning, setup, and refreshments. The Augusta Rule helps you reimburse yourself for what you’re already providing. These are costs you’re already incurring—like electricity, water, HVAC wear and tear, internet usage, garbage removal, housecleaning, landscaping, and general upkeep—when you make your home available for business use. With the Augusta Rule, you're not adding more out-of-pocket expenses; you're simply capturing the economic value of space and resources you're already using to support your business. The income is tax-free to you, tax-deductible to your business, and fully compliant when well-documented—a rare win-win.
Who Can Use It
This strategy is ideal for business owners who operate through an LLC, S Corp, or C Corp and also personally own a residence. It works best when there's a separation between you and the business (e.g., you're paying yourself from the business). It’s commonly used by consultants, agency owners, professionals, and others who have control over where and how business meetings are held.
Where It Applies (and How to Stay Compliant)
To qualify, the use of your home must be ordinary and necessary for your business—think strategy meetings, team planning days, investor dinners, or even client appreciation events. Importantly, you must document everything: the business purpose, date, attendees, agenda, and meeting notes. Abuse of this rule in the past has caught the IRS’s attention, so diligent substantiation is key. Without it, deductions can be disallowed or reclassified as taxable income.
The home must not be your primary business location. You’re renting it for short, specific events—not using it as an office full-time.
When to Use It
This is an annual opportunity, and you can apply it retroactively if you held qualifying meetings earlier in the year and still have supporting documentation. Ideally, your business pays you before year-end, but payments made before filing the business tax return are acceptable—as long as everything is properly documented.
For the home to count as being “rented” on a given day, there must be a substantial use of the home during that day for business purposes. While the IRS doesn’t define an exact number of hours in Section 280A(g), prevailing guidance and case law suggest that a meaningful portion of the day—typically four or more hours—is sufficient, especially if preparation, hosting, and cleanup are involved. For instance, a half-day strategy meeting, a client dinner setup, or an investor event with prep and breakdown time would generally qualify. Citing IRC §280A(g), the key is to ensure the use is legitimate, time-bound, and well-substantiated.
Action Steps
Identify past or future meetings that took place in your home (strategy days, client sessions, board meetings).
Research comparable venue rental rates to determine a reasonable charge. Our firm can assist with this rental rate analysis to ensure it’s well-supported.
Document the meetings: calendar invites, agendas, attendee lists, and meeting summaries.
Issue an invoice from yourself to your business, and have the business pay it before year end.
Cap it at 14 days per year—any more and the income becomes taxable.
Bonus: Pair the Augusta Rule with your Board of Advisors Strategy
The Augusta Rule becomes even more powerful when paired with a Board of Advisors strategy. If you have friends, family members, or colleagues formally serving as advisors to your business, you can host board meetings, strategy sessions, or business dinners at your home with these close individuals who are in your circle. These meetings can qualify under the Augusta Rule when properly documented—and the shared meals or discussions become legitimate business activities. This allows you to not only engage valuable input from trusted voices but also optimize tax strategy in the process. It’s a practical and meaningful way to build both governance and tax efficiency into your business.
If you’d like help setting this up or reviewing your documentation, our team is here to support you. Please contact a team member if you any questions.