Definition
The Augusta Rule lets a homeowner rent out their personal residence for up to 14 days per year and exclude that rental income from taxable income entirely.
How It Works
Named after the town that hosts the Masters, the rule allows a business owner's company to rent the owner's home for legitimate purposes such as board meetings or strategy sessions and pay a reasonable market rate. The business deducts the payment as a real expense, and the owner receives it tax-free, as long as the home is rented for 14 or fewer days in the year.
Example
A company holds four documented quarterly planning meetings at the owner's home and pays a market venue rate of $1,500 per day. The business deducts the payments and the owner excludes the income, since total rental days stay under 14.
When It Works Best
It works best for business owners who hold genuine business meetings and can document a defensible market rate.
Who It Applies To
Business owners with a home and a legitimate business reason to use it.
Watch-Outs
The rate must reflect true market value supported by comparable quotes, the meetings must be real and backed by agendas and minutes, and rental days must be tracked. Renting beyond 14 days makes all the rental income taxable. Weak documentation is the fastest way to lose the benefit in an audit.
