Federal "Augusta Rule" (§ 280A(g)) Tax-Free Rental Calculator

How this calculator works

IRC § 280A(g) — informally called the "Augusta Rule" — carves out a narrow but powerful exception to the general rental-income inclusion rule: if a personal residence is rented for fewer than 15 days during the calendar year, the rental income is EXCLUDED FROM GROSS INCOME. No income tax. No self-employment tax. No reporting on Schedule E as taxable income.

The most popular use is the closely-held-entity strategy: an owner of an S-corp, partnership, or single-member LLC rents their personal residence to their own business for board meetings, strategic retreats, training sessions, or client events. The rent is a § 162 business deduction for the entity AND tax-free income for the owner under § 280A(g) — shifting business income to tax-free personal income at the owner's marginal federal + state rate.

This calculator surfaces the federal-pure § 280A(g) mechanic in a single planning view: the 14-day cap, the tax-free income amount, the business deduction value, the federal + state tax savings, the Form 1099-MISC reporting threshold, and an audit-risk score keyed to day count and number of documented fair-market-rate comparables.

The origin: Augusta National Golf Club

The name comes from Augusta National Golf Club in Augusta, Georgia — host of The Masters tournament each April. Local Augusta homeowners traditionally rent their residences to tournament attendees for one week each spring at premium rates ($5,000–$20,000+ for the week, depending on the property's proximity to the course). When Congress enacted IRC § 280A in 1976 to address the vacation-home deduction problem, the 14-day exclusion was included to accommodate this Augusta practice — Senator Sam Nunn of Georgia is often credited with pushing for the carve-out.

The exception has remained at fewer-than-15-days since enactment and applies to any personal residence anywhere in the United States. The "Augusta Rule" label stuck because Augusta was the canonical fact pattern Congress had in mind — but the rule is general, and the business-owner strategy described below is now the rule's dominant use case.

The business-owner strategy

The mechanics:

1. The owner of a closely-held entity (S-corp, partnership, single-member LLC, or — less commonly — C-corp) enters into a written rental agreement to rent their personal residence to the entity for business meetings.
2. The entity pays rent at fair market rate — comparable to what a hotel ballroom, AirBnB, or event venue would charge for the same use.
3. The rent is:
   • A business deduction for the entity under IRC § 162 (Schedule C / Form 1120-S / Form 1065).
   • Tax-free income for the owner under § 280A(g).
4. Net effect: shifts $X of taxable business income to tax-free personal income — saving the owner's marginal federal rate plus state rate (plus often FICA, if the W-2 alternative would have been a higher reasonable-compensation figure to extract the same cash).

The strategy works only if the 14-day cap is respected, the rate is supportable, and the business purpose is bona fide and documented. The next sections work through five scenarios and the documentation that holds up at Tax Court.

Worked example 1 — S-corp owner, 12 days at $1,500/day

An S-corp owner rents their personal residence to their own entity for 12 board-meeting and strategic-retreat days during the year, at a fair-market rate of $1,500/day (supported by 3 hotel-ballroom rate cards in the file).

• Total gross rent: 12 × $1,500 = $18,000
• § 280A(g) excluded income: $18,000 (compliant — 12 ≤ 14 days)
• § 162 business deduction: $18,000 at the entity level
• Federal tax savings: $18,000 × 32% = $5,760
• State tax savings: $18,000 × 5% = $900
• Total tax savings: $6,660
• Form 1099-MISC required: Yes — entity issues 1099 to owner; owner offsets on Schedule E

This is the canonical favorable case. The audit-risk score is moderate (12 days approaches the cap; would be low at ≤ 8 days with 3 comps).

Worked example 2 — max-cap utilization, 14 days at $2,000/day

Same owner, but they fully utilize the cap and command a higher rate (executive-retreat use case, supported by event-venue quotes):

• Total gross rent: 14 × $2,000 = $28,000
• § 280A(g) excluded income: $28,000 (compliant — 14 ≤ 14 days)
• § 162 business deduction: $28,000
• Federal + state tax savings at 32% + 5%: $10,360

The 14-day-exact pattern is statutorily allowed but draws closer IRS scrutiny than 8–12 days. Conservative practitioners typically recommend 10–12 days with strong documentation rather than 14 with weaker documentation — the marginal $4,000–$8,000 of additional tax savings is often not worth the audit-defense burden if the documentation is thin.

Worked example 3 — the 15-day cliff voids everything

Same property, same business purpose, but rented for 15 days at $1,000/day:

• Total gross rent: 15 × $1,000 = $15,000
• § 280A(g) excluded income: $0 (day 15 voids the exception entirely — no proration)
• The full $15,000 is includible in gross income under the regular § 280A(a)-(d) vacation-home rules
• Deductions for mortgage interest, property tax, depreciation, and utilities allocated to those 15 days are allowed under Treas. Reg. § 1.280A-3 — typically using rental-days / total-use-days (the "Bolton method")
• Net result: almost always less attractive than the pure 14-day-or-less exclusion. The offsetting allocated deductions rarely cover the included rental income.

There is no statutory relief for accidentally exceeding the cap. The only fix is prospective: in future years, cap rental strictly at 14. A taxpayer who realizes mid-December that they have hit 14 days should NOT schedule a 15th meeting day — the entire year's tax benefit evaporates.

Worked example 4 — no comps, single instance

Same owner, same 12 days at $1,500/day, but zero independent rate comparables on file:

• § 280A(g) excluded income: $18,000 (technically compliant on day count)
• Audit-risk score: review documentation
• IRS argument under § 267 and Treas. Reg. § 1.280A-3: the rate is not demonstrably fair market value; recharacterize as constructive distribution or disallow the entity's § 162 deduction

This is the most common Tax Court loss pattern. The taxpayer prevails on the day-count element but loses on the FMV element — the IRS does not need to win on the § 280A(g) exclusion itself; attacking the entity-side deduction under § 267 produces the same revenue. Conservative practice: 3+ independent comps, dated near the rental dates, matched to the actual use case.

Worked example 5 — conservative pattern, 8 days at $1,500/day

Same owner, 8 days, $1,500/day, 3+ documented comps:

• Total gross rent: 8 × $1,500 = $12,000
• § 280A(g) excluded income: $12,000
• Federal + state tax savings at 32% + 5%: $4,440
• Audit-risk score: LOW — ≤ 8 days with 3+ comps falls in the structurally lowest-risk band

The total tax savings is lower than Example 1 ($4,440 vs $6,660), but the audit-defense profile is much stronger. For owners running multi-year Augusta-Rule strategies, the structural-low-risk pattern is the right starting point.

Documentation best practices

Five elements that consistently survive IRS scrutiny:

1. Written rental agreement between owner and entity, dated and specifying the per-day rate, the dates of use, and the purpose.
2. Contemporaneous calendar of meeting dates — a real-time calendar entry made before or on the day of the meeting (not a year-end reconstruction; year-end reconstructions lose at Tax Court almost without exception).
3. Meeting agenda — a written agenda for each meeting day showing the business topics covered.
4. Meeting minutes — a written summary of what was discussed and decided, signed by attendees. The minutes do double duty: they substantiate both the business-purpose element (required for the § 162 entity deduction) and the rental-use element (required for the § 280A(g) owner exclusion).
5. Rate comparables — 3+ independent sources establishing FMV (hotel rate cards, AirBnB screenshots, event-venue quotes), dated near the rental dates and matched to the actual use (12-person board meeting → hotel boardroom comp; multi-day strategic retreat → corporate retreat-center comp).

Form 1099-MISC reporting mechanics

Under IRC § 6041, a business that pays a non-employee ≥ $600 in rent during a calendar year must issue Form 1099-MISC (Box 1, Rents) to the payee. The 1099 is issued by the entity to the owner — even though the owner does NOT include the rent in gross income because it is excluded under § 280A(g).

Reporting flow on the owner's return:

• Schedule E, Line 3 (Rents received): report the full 1099 amount
• Schedule E, Line 20 (Other expenses): enter an offsetting negative amount labeled "§ 280A(g) excluded — fewer than 15 days personal residence rental"
• Net Schedule E income from the activity: $0

This procedure is the practitioner consensus under Rev. Rul. 2006-52. Skipping the 1099 entirely is technically a § 6041 violation by the business (subject to penalties under § 6721 — typically $310/form in 2026); reporting on Schedule E but failing to back out the excluded amount on Line 20 is a common preparer error that triggers an automated IRS notice when the matching algorithm flags the unreconciled 1099.

Audit-risk indicators

IRS Augusta-Rule audits focus on patterns that suggest abuse rather than legitimate business use:

• High per-day rates without comps — $5,000+/day with only a single self-generated estimate, or rates that exceed the highest local comparable by multiples
• Days at the 14-day cap year after year — looks like income-shifting rather than real meetings, especially if the same exact 14-day pattern repeats with no variation
• Family-only attendees — meetings with only the owner and spouse (no business outsiders, no employees, no advisors) raise the question of whether the meetings are substantively business or social
• Perfectly round numbers — $1,000/day for 14 days = $14,000 exactly, with no per-day variation, suggests a number was picked first and meetings backfilled
• No agenda, no minutes, no contemporaneous calendar — the most common Tax Court loss is the taxpayer who produces a year-end reconstructed calendar after the audit notice arrives
• Property is otherwise unused — if the residence is in fact a vacation home and never used as a primary or secondary residence, the rental may not qualify as a "personal residence" under § 280A(d)

Conservative practice: 8–12 days at a moderate rate ($1,000–$2,500/day depending on the property and metro), with documented business outsiders attending some meetings, with 3+ rate comps in the file, with a real-time calendar.

Comparison to § 280A(c) home office deduction

§ 280A(g) (the Augusta Rule) and § 280A(c) (the home office deduction) are governed by different parts of the same Code section and are fully compatible — a taxpayer can claim a home office deduction for a dedicated room used exclusively for business AND rent the entire residence to their entity for 14 or fewer days under § 280A(g). The two provisions do not interact for purposes of the 14-day cap (the home-office area is not "rental use" for the count — it's exclusive-business use under a different statutory provision).

§ 280A(c) requires the office to be (a) exclusively and regularly used for business and (b) the principal place of business OR a place where the taxpayer regularly meets clients/customers (or a separate structure not attached to the dwelling unit). The deduction is computed via the simplified method ($5/sq ft up to 300 sq ft = $1,500 max) or the actual-expense method (allocated mortgage interest, property tax, depreciation, utilities, insurance).

Both provisions can be claimed in the same year for the same residence without conflict — a fact pattern that maximizes the § 280A regime's planning value for closely-held owner-operators.

Related-party scrutiny under § 267

IRC § 267 governs transactions between related parties — including an individual and a corporation more than 50%-owned by the individual, or a partnership and a partner. When the renter is the owner's closely-held entity, the rent payment is a related-party transaction subject to § 267 fair-market-value scrutiny.

The IRS can disallow the entity's § 162 deduction (or recharacterize the excess above FMV as a constructive distribution / dividend) if the rate exceeds what an unrelated third party would pay. The owner's § 280A(g) exclusion is not directly limited by § 267 — the exclusion applies to whatever rent is actually paid for the qualifying days — but a § 267 challenge typically attacks the entity-side deduction, and a successful IRS challenge produces the worst-of-both-worlds result: the entity loses the deduction (tax owed on the deducted amount at the entity rate, plus penalties and interest) while the owner's exclusion stands (no offsetting tax savings on the personal side).

This is why the FMV documentation is so important — § 267 is the IRS's primary attack surface, not the § 280A(g) exception itself.

Common errors

• Exceeding 14 days even by 1 (the entire year's exception voids — no proration)
• Setting a per-day rate that exceeds local comparables without documentation
• Year-end reconstructed calendar instead of contemporaneous records
• Missing the written rental agreement
• Missing the 1099-MISC entirely (entity violates § 6041)
• Reporting the 1099 on Schedule E without the Line 20 offset (triggers automated IRS notice)
• Treating real estate brokerage or rental as a § 280A(g) opportunity (the rule applies to use as a residence, not to investment rental property)
• Confusing § 280A(g) with the § 121 primary-residence-sale exclusion (different provisions, different mechanics)

Statute citations

• IRC § 280A(g) — 14-day rental income exclusion (the "Augusta Rule")
• IRC § 280A(a)-(d) — general vacation-home rules (apply at 15+ days)
• IRC § 280A(c) — home office deduction (compatible with § 280A(g))
• IRC § 162 — business deduction for entity-level rent payment
• IRC § 267 — related-party transaction fair-market-value rules
• IRC § 6041 — Form 1099-MISC reporting threshold ($600)
• Treas. Reg. § 1.280A-3 — allocation rules for mixed-use residence
• Rev. Rul. 2006-52 — Schedule E reporting mechanics for excluded amounts
• IRS Pub. 527 — Residential Rental Property
• IRS Pub. 535 — Business Expenses (entity-level § 162 rent deduction)
• Bryant v. Comm'r line of Tax Court Memorandum cases — judicial treatment of abusive arrangements

Important caveats

This is a planning tool, not legal or tax advice. It does not model the post-15-day allocated-deduction computation under § 280A(a)-(d) (the user is alerted that the exception is void but the offsetting Schedule A / Schedule E allocation is not computed), the C-corp constructive-dividend recharacterization risk under § 301 if rent exceeds FMV, the state-level conformity (most states follow the federal exclusion; some do not — verify in non-conforming states), or the interaction with passive activity loss rules under § 469 (generally not triggered by a 14-day-or-less rental but can be relevant for mixed-use property). Consult a CPA or tax attorney before relying on the position — especially for the FMV element under § 267, which is the IRS's most-litigated attack surface in this area.