What is the Augusta Rule?

What is the Augusta Rule? — §280A(g)

The Augusta Rule is a provision in U.S. tax law, specifically IRS Section 280A(g). Under this provision, a homeowner may rent out his or her primary residence/second home for up to 14 days every year while excluding that rental income from their federal gross income. 

So where did the name come from? The nickname ‘Augusta Rule’ started with homeowners near Augusta, Georgia, where many of the residents rented their homes during annual golf tournaments held at Augusta National Golf Club.

Congress understood the need for a short-term rental exception and solidified it in Section 280A(g) so that the Augusta homeowners wouldn’t face negative tax consequences when renting their homes for only a few days each year for that tournament. 

Is the Augusta Rule Still Applicable in 2026? 

Yes! The Augusta Rule works nationwide, and 2026 looks the same for now.  

In short, the Augusta Rule remains valid across the United States, and there are no publicly known changes scheduled for 2026.

Who Is Eligible for the Augusta Rule? 

If you are a U.S. homeowner who owns a residence that qualifies as a “dwelling unit used as a residence,” then there’s a good chance you may benefit from the Augusta Rule if you decide to rent it for two weeks or fewer each year. 

For your home to be considered a “dwelling unit used as a residence,” you must fit the criteria: 

• Must be a property designed for living, such as a house, apartment, condo, mobile home, or boat, including any attached or related structures. 
• It counts as a residence if you or your family personally use it for more than 14 days, or for more than 10% of the days it is rented at fair rental value. 
  • Personal use includes any day that you, a family member, or anyone using it under a non-commercial arrangement stays there. 
  • A portion of property used exclusively as a hotel, motel, or similar commercial lodging does not qualify as a residence. 

This includes a primary residence, a second home, or a vacation home, so long as the unit is considered a residence for you. 

You often see the rule used when individuals rent their home to their own business, provided the rental is for a legitimate business purpose.

How Does the Augusta Rule Work? 

Here is how you can use the Augusta Rule in a compliant way: 

• Rent your home (or a business-suitable portion) to a business or other valid tenant for no more than 14 days a year. 
• Charge a reasonable rental rate reflecting fair market value. The rental income under the Augusta Rule should be comparable to what similar homes or venues would expect. To demonstrate FMV, reference local short-term rental listings, venue rates for similar meeting spaces, seasonal pricing trends, or written quotes for comparable rentals. 
• Ensure the arrangement is documented clearly. If you rent to your business, you need to maintain a written rental agreement or invoice. Be sure to record the business purpose of the rental, attendees (if relevant), dates, and any other supporting info. 
• Process payments properly. The business should pay rent with a check or other traceable transfer, similar to how it would pay for a third-party venue. 

Once these conditions are satisfied and the stay doesn’t go over 14 days, then your rental income is excluded from the homeowner’s taxable income. 

Additional Consideration: Insurance & Liability 

Before you decide to rent out your home (even for a short period under the Augusta Rule), it’s wise to speak with your property and casualty insurance agent. 
 
Some insurers require a rider or endorsement when a home is used for short-term rentals, business meetings, or events… This extra coverage can help protect you in the event of property damage, guest injuries, or liability claims that occur during the rental period. 

Confirming this in advance ensures you remain fully covered and avoids any surprises should an incident happen.

What’s a Real-Life Example of the Augusta Rule? 

Example 1) The S-Corp Owner 

• An S-Corp owner holds four strategy meetings at home each year instead of renting a hotel conference room. Comparable venues charge around $1,000–$1,400 per day, so the business rents the home space for $1,200/day × 4 days = $4,800. 
• The S-Corp deducts the cost, and the owner receives $4,800 tax-free under the Augusta Rule. A simple rental agreement, a clear business purpose, and proof of fair market pricing keep everything compliant. 

Example 2) The Vacation-Home Owners During a Local Event 

• A family with a Cape Cod vacation home rents it during a popular 10-day summer festival. With local places going for about ~$600/night, they earn ~$6,000 tax-free. 
• They stay under the 14-day limit, document the market rate, and avoid having their property treated as a rental for tax purposes.

What Are Some Pros and Cons of the Augusta Rule? 

The Pros 

• Tax-free income from rental of your personal residence. This income doesn’t need to be reported on Form 1040. 
• Business deduction. If it’s made to your own business, the business can deduct the rental expense, reducing its taxable income. Meanwhile, you as the homeowner receive the payment tax-free.  
• Flexibility of use. The rule applies to primary homes, second homes, and vacation homes nationwide. You are not restricted to properties near a major event or in a specific location.  

The Cons 

• Exceeding the 14‐day limit disqualifies the exemption. If you rent 15+ days/year, then you must follow the standard rental property tax rules. 
• No deduction of rental-related expenses. If you are using the 14-day exclusion, you can’t deduct expenses related to the rental, like: 
  • Maintenance 
  • Repairs 
  • Depreciation 
• The rent must be reasonably priced. Overcharging above fair market value can draw scrutiny from tax authorities. 
• Documentation is essential. It’s important to keep records throughout the entire transaction. This includes a written rental agreement or invoice, evidence of business purpose, records of payment, and any relevant business-use documentation if rented to your own company.

Should I Use the Augusta Rule for My Property? 

Yes, it may be a beneficial idea if… 

• You rarely need to rent your home, but you might need a venue for occasional business meetings or retreats. 
• You own a business that would otherwise pay to rent office space or meeting rooms. 
• You are comfortable maintaining documentation and following IRS rules carefully. 
• You want to maximize tax efficiency by receiving tax-free income while also enabling your business to deduct a legitimate expense.

Our Final Thoughts on the Augusta Rule 

The Augusta Rule remains a valid and potentially powerful tax-planning tool for homeowners across the United States.  

If you follow the rules and keep documentation, then the rule allows you as the homeowner to earn tax-free rental income for up to 14 days per year.  

Plus, if you’re a business owner, then the rule can provide a dual benefit:  

1. It’s a tax-free personal income 
2. It’s a deductible business expense  

If you are considering using the Augusta Rule, reach out to the Asset Strategy team to review your unique circumstances. We can determine if this strategy is the right option for you.