How to Use the Augusta Rule to Keep More Money | The 14-Day Tax Hack
Believe it or not, I am actually talking about Augusta, GA, and the masters.
The Augusta Rule is a tax strategy that allows homeowners to earn rental income without paying taxes on it. Under IRS Section 280A, you can rent your home for up to 14 days per year and exclude that income from your taxable earnings.
For business owners, this presents a unique opportunity: your business can rent your home for legitimate business purposes, providing you with tax-free income while your business gets a deductible expense. However, to stay compliant, you must follow the rules carefully.
Related: Mastering Business and Wealth: A Guide for Business Owners
How the Augusta Rule Works
Homeowners can rent their residence for up to 14 days per year without reporting the income.
Rental payments must be at fair market value.
The home must not be used as a full-time rental property.
The rental must have a legitimate business purpose (e.g., business meetings, retreats, strategy sessions).
This rule was originally used by homeowners in Augusta, Georgia, who rented out their homes during the Masters golf tournament. Today, business owners nationwide are using it as a tax-advantaged strategy.
How to Use the Augusta Rule in Your Business
If you own a business, you can legally rent your home to your company and write off the rental expense—while you personally receive the income tax-free. To do this properly:
1.Set a Fair Market Rental Rate
Research local rental listings, Airbnb rates, or get a valuation from a real estate agent (key: think about time periods with the highest rent. For example, Auburn, AL has the highest rent on home football game weekends)
Document the pricing research to justify the rental amount.
2. Create a Rental Agreement
Outline the rental terms, including the purpose, date, and rate.
Keep records of payments and meeting minutes. Again, this has to be used for business purposes, and there has to be a record.
3. Pay Yourself from Your Business
Your business must issue the rental payment just like it would for any other rental property.
Transfer the money from your business account to your personal account and record the transaction.
4. Document the Business Use
Take meeting notes, keep attendance records, and save relevant emails or agendas.
Avoid personal use of the home during the rental period.
Benefits of the Augusta Rule
For You as a Homeowner
✅ Tax-free income – Up to 14 days of rental income is excluded from your tax return.
✅ No additional taxes – Unlike salary or dividends, rental income under this rule isn’t subject to income tax or payroll taxes.
For You as a Business Owner
✅ Deductible expense – Your company gets a tax deduction for the rental expense.
✅ Lower overall tax burden – Shifting business expenses to tax-free income reduces your taxable income.
Real-World Examples
Case Study #1: Business Owner Hosting Quarterly Meetings
A small business owner runs quarterly board meetings from home. The company rents the house for four days per quarter at a fair market rate of $2,000 per meeting.
Total rental income received: $8,000 (tax-free)
Total business deduction: $8,000
This effectively moves $8,000 of income from taxable salary/dividends to tax-free rental income.
Case Study #2: Company Retreat at a Vacation Home
A business owner with a vacation home rents it to their company for an annual strategy retreat.
Fair rental value: $3,500 per day
Total rental for 4 days: $14,000 tax-free
Business writes off $14,000 as an expense
Common Mistakes and How to Avoid Them
🚫 Overpricing the Rent – If the IRS challenges your rate as excessive, they may disallow the deduction. Use comparable listings to justify your price.
🚫 Lack of Documentation – Keep contracts, meeting notes, and proof of payment in case of an audit.
🚫 Exceeding the 14-Day Limit – The IRS is strict about this. Keep track of your rental days.
The Augusta Rule is a powerful tax strategy when executed properly. If you own a business and a home, you can legally reduce your tax liability while keeping more money in your pocket. However, documentation is key. Work with a tax professional to ensure compliance and maximize the benefits.
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About the author: Finn Price, CPFA, CEPA, is a business owner and wealth manager at Railroad Investment Group. He helps successful entrepreneurs & individuals with concentrated stock positions in their 30s, 40s and 50s build, organize, protect and transfer their wealth.
Note: this article is general guidance and education, not advice. Consult your money person or your attorney for financial, tax, and legal advice specific to your situation.
Securities and advisory services offered through LPL Financial, a registered investment Advisor, Member FINRA/SIPC.
