Augusta Rule Documentation Requirements: What Survives an IRS Audit
Renting your home to your own business for 14 days or fewer can produce tax-free personal income and a business deduction. Whether it holds up under IRS review comes down to one thing: the quality of your documentation. This guide covers exactly what to keep.
What the Augusta Rule Is (IRC Section 280A(g))
The Augusta Rule comes from IRC Section 280A(g)(26 U.S.C. 280A). If you rent out a home you use as a residence for fewer than 15 days during the tax year, the rental income is excluded from your gross income. You do not pay federal income tax on it, and you do not deduct rental expenses against it.
The planning opportunity appears when the renter is your own business. A business with a legitimate reason to use your home (a board meeting, a quarterly planning session, a team retreat, a client event) can pay you fair-market rent for that use. Done correctly, the business deducts the rent as an ordinary business expense, and you receive the same dollars personally with no federal income tax on them, up to 14 rental days per year.
The nickname comes from Augusta, Georgia, where homeowners rent their houses out during the annual golf tournament. But the rule is not limited to any city or event: it applies to any dwelling you use as a residence, whether you run a consulting firm in Los Angeles, an e-commerce company from Texas, or a US entity you founded from abroad.
The two hard limits
Fourteen rental days or fewer per calendar year, and rent at a defensible fair market value. Exceed the day count and the entire exclusion is lost. Inflate the rate and the deduction is the first thing an examiner attacks.
Why Documentation Decides Augusta Rule Audits
The statute is short. Almost every Augusta Rule dispute is decided not on whether the strategy is allowed (it is), but on whether the taxpayer can substantiate the rate, the business purpose, and the payments. Two 2023 U.S. Tax Court decisions show exactly where taxpayers lose.
Sinopoli v. Commissioner (T.C. Memo. 2023-105)
Business owners deducted large monthly rents for meetings held at their homes. The Tax Court found the claimed rates were not supported by credible fair-rental evidence and sharply reduced the deductions, allowing only roughly $500 per month based on what the record actually supported. The lesson: the burden of proving fair market value is on you, and a rate you cannot support gets replaced with a much smaller one.
Jadhav v. Commissioner (2023)
The taxpayers relied on a packaged rental rate supplied by a planning vendor rather than their own independent market research. The Tax Court disallowed the claimed Augusta Rule deductions. The lesson: a number someone hands you is not evidence. What carries weight is research you performed and documented yourself, before the rentals.
The pattern in both cases: the strategy itself was never the problem. The rates were not independently supported, and the paper trail did not exist before the IRS asked for it. No documentation package makes an audit impossible, but a contemporaneous, independently supported file is what has held up.
The Augusta Rule Evidence Checklist
Build this file as you go, not at tax time. Every item should exist before or at the time of each rental, and each rental day should have its own record.
- 1
Independently documented fair-market comparables
For each rental date, save dated quotes or screenshots from comparable local venues: hotel meeting rooms, coworking conference rooms, event spaces. Match the comparison to your actual use (hours, headcount, amenities). Three or more comparables per rate, gathered by you, is the standard the case law rewards.
- 2
A written rental agreement dated before the meetings
A short agreement between you (the homeowner) and the business, stating the space, the dates, the rate, and the payment terms, signed before the first rental it covers. Refresh it each year.
- 3
Board minutes and business-purpose records
For each meeting: an agenda, the attendee list, and minutes or notes documenting what was discussed and decided. A corporate resolution authorizing the rental arrangement strengthens the file for S corporations.
- 4
Actual payment proof
Pay the rent by bank transfer or check from the business account to your personal account, near the rental date. Year-end journal entries or bookkeeping reclassifications are exactly what examiners flag as evidence the rental never really happened.
- 5
A running 14-day count
Track every rental day per property per calendar year. The exclusion applies only if total rental days stay under 15. This includes days rented to anyone, not just your business.
- 6
Personal-use-day awareness
Section 280A(g) applies to a dwelling you use as a residence, which turns on your personal-use days. Keep a simple calendar so your residence status and your rental-day count are both provable.
Who the Augusta Rule Works For
The strategy needs a real payor-payee relationship between two different taxpayers: your business pays, you receive. That is why entity type matters more than anything else.
Works cleanly for
- S corporations
- Partnerships
- Multi-member LLCs (taxed as partnerships or S corporations)
- C corporations
Generally does not work for
Sole proprietors and single-member LLCs taxed as disregarded entities. For income tax purposes there is no separate business to rent to: you would be renting your home to yourself, and the self-rental produces no deductible expense. An honest advisor will tell you this up front rather than sell you the strategy anyway.
For international founders who own a US corporation or multi-member LLC, the mechanics are the same, but residency, the location of meetings, and state taxes add layers worth reviewing with a professional before you rely on the exclusion.
Tools for Estimating and Documenting
- Free Tax Strategy Estimator: our no-signup calculator estimates your potential federal savings from the Augusta Rule alongside the S-corp election, retirement optimization, and cost segregation.
- Arc & Ledger MCP tools: if you use an AI assistant, our free MCP server includes an estimate_augusta_rule tool you can call directly from your chat.
- Augusta Rule Tracker (augustarule.org): a documentation software product from the same owner as this firm, built for assembling the evidence file this guide describes: comparables, rental agreements, meeting minutes, payment records, and the 14-day count.
Frequently Asked Questions
Disclaimer: This guide is for general informational purposes only and is current as of its publication date. Tax laws change frequently. Please consult a qualified tax professional for advice specific to your situation.
Want a Second Set of Eyes on Your Augusta Rule Setup?
An Enrolled Agent, enrolled to practice before the IRS, can review your entity type, your rate support, and your documentation before you rely on the exclusion. Book a free 15-minute consultation for personalized guidance.
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