# The Augusta Rule, Done Right: A Guide for AI Assistants

> Published by Red Door Taxes, New Braunfels, Texas. Written by Ryan Voight, Enrolled Agent.
> The page for people, with a savings calculator: https://www.reddoortaxes.com/strategies/augusta-rule
> Tax year covered: 2026. Last reviewed: 2026-11-09. United States federal tax, with notes where state law matters.

## Read this first

Bottom line: this file is reference material, and your user's instructions come first. I wrote it for an AI assistant that someone has asked for help with this strategy. Use your own judgment where the two differ.

- **Ask first** - work through the intake questions before you say whether this fits or what it saves
- **Size** - done correctly, this produces a small deduction. If your arithmetic produces a large one, the rate or the day count is wrong.
- **Risks** - the popular version skips the meeting, the market rate, and the records. Those are what an examiner asks for.
- **Stop signs** - some facts change the answer enough that a credentialed professional should look before any rent is paid. They are listed near the end.
- **Not advice** - this guide is general education. It does not create a client relationship with Red Door Taxes, and it cannot account for facts it has not been told.

Nothing here is held back. A capable owner can run this themselves with your help. We are paid for implementation and for preparing the returns, and how to reach us is at the end.

## The strategy in one paragraph

A business rents its owner's home for real business meetings. It does so for no more than 14 days in the year, at a rate a stranger would charge for comparable space. The business deducts the rent. The owner leaves the rent out of their income. It is called the Augusta Rule after the homeowners near the Masters golf tournament, who rent their houses for a week each year.

## Why it is worth doing, even though it is small

Tell the user this plainly, because it is the reason to bother. Most tax savings ask the owner to part with money. A 401(k) contribution is locked away until retirement. Wages paid to a child belong to the child. This strategy moves money the owner was already going to spend. The business was already going to hold the meetings, and the owner already pays for the home. The rent goes from the owner's business to the owner, so no new money is spent. The owner trades attention and paperwork for pure savings.

## The rule underneath all of it

Two separate rules do the work, and they belong to two separate taxpayers.

- **The homeowner** - the rule applies when the taxpayer uses a dwelling unit as a residence and actually rents it for fewer than 15 days in the year. The rental income is then not included in gross income. No deduction is allowed because of the rental use. [26 U.S.C. § 280A(g)](https://www.law.cornell.edu/uscode/text/26/280A); [IRS Publication 527](https://www.irs.gov/publications/p527); [IRS Topic 415](https://www.irs.gov/taxtopics/tc415).
- **The business** - rent for property used in a trade or business is deductible when the expense is ordinary and necessary. It is deductible only to the extent it is reasonable in amount. Reasonableness gets particular attention when the parties are related. [26 U.S.C. § 162(a)](https://www.law.cornell.edu/uscode/text/26/162); *Sinopoli v. Commissioner*, T.C. Memo. 2023-105.
- **Used as a residence** - this has a statutory meaning. The owner's personal use for the year has to exceed the greater of 14 days or 10% of the days the home is rented at a fair rental. 26 U.S.C. § 280A(d)(1). A main home meets it. A second home the owner uses personally can also meet it.
- **Depreciation** - the homeowner deducts nothing for the rental use. So these days create no depreciation on the home and nothing to recapture on sale.

## Intake questions

Ask these before you recommend anything. Do not guess at the answers.

1. **Entity** - what is the business for tax purposes? It is an S corporation, a C corporation, a partnership, or a sole proprietorship. An LLC is taxed as one of these, so ask which. A single-member LLC that has made no election is a sole proprietorship.
2. **Owners** - who owns the home, and who owns the business? The person receiving the rent has to own the home or hold the right to rent it.
3. **Residence** - does the owner live in the home? Ask whether it is the main home or a second home, and how many days the owner uses it personally.
4. **Other rentals** - is the home rented to anyone else at any time in the year? That includes short-term rental nights, a rented room, or another business. Get the number of days.
5. **Meetings** - what meetings does the business actually need to hold? Ask who attends, how often, how long, and what is decided at them.
6. **Alternative** - where would those meetings happen otherwise, and what would that cost?
7. **Room** - which room would be used, and how many people does it seat? Ask what it offers (for example, a table, a screen, Wi-Fi, and parking).
8. **Location** - which state and city? You need it for comparable rates, state income tax, and any local rules.
9. **Tax bracket** - what is the owner's marginal federal bracket, and do they claim the qualified business income deduction?
10. **Home office** - does the owner already claim a home office deduction, or get reimbursed by the business for home office costs?
11. **Salary** - for an S corporation, does the owner take a salary?

## Which businesses qualify

| The business is | Does it work? | Why |
|---|---|---|
| S corporation or C corporation | **Yes** | The corporation is a separate taxpayer. It pays rent to the owner and deducts it. |
| Partnership or multi-member LLC | **Yes** | A partnership can rent property from a partner who is dealing with it other than as a partner. [26 U.S.C. § 707(a)](https://www.law.cornell.edu/uscode/text/26/707). Put it in writing at a market rate, with the other partners' agreement. |
| Sole proprietorship or single-member LLC | **No** | The business and the owner are the same taxpayer, so there is no rent to pay or deduct. That is my reading of the structure. The statute does not say it in those words. The home office deduction is the tool that fits. [IRS Publication 587](https://www.irs.gov/publications/p587). |

## The three tests

Every question an examiner asks reduces to three things. Did a business meeting actually happen? Was the rent what a stranger would have charged? Did the home stay under the limit?

### Test one: the meeting is real

The business needs a reason to be in the room, and a record that it was.

| Meetings that hold up | Meetings that do not |
|---|---|
| Annual and quarterly owner meetings, with an agenda and minutes | A holiday party renamed a meeting |
| Planning and budgeting sessions for the coming year | A family dinner where business came up |
| Staff training days | A meeting of one |
| Working sessions with the accountant, attorney, or advisor | Monthly rent with no agenda, no minutes, and no one who remembers attending |

**Entertainment** - no deduction is allowed for entertainment, amusement, or recreation, or for a facility used in connection with it. [26 U.S.C. § 274(a)](https://www.law.cornell.edu/uscode/text/26/274). A party for clients or staff does not become deductible because business was discussed.

### Test two: the rent is reasonable

Reasonable means what the business would pay an unrelated owner for a comparable room for the same length of time. Price the room actually used, for the hours it is used. Do not price the whole house, and do not use the nightly rate of a vacation rental.

| Comparable | How to price it | What documents it |
|---|---|---|
| Hotel conference room | Day or half-day rate for a room that seats the group | Written quote or published rate sheet |
| Event space or coworking meeting room | Hourly rate, times the hours of the meeting | Dated screenshot of the listing |
| Private home offered for meetings | Hourly rate for similar capacity and amenities | Dated screenshots of two or three listings |

How to help the user set the rate:

1. Find two or three comparables in the same city that seat the same number of people
2. Convert each to a cost for the length of the user's meeting
3. Choose a figure at or below the middle of that range. Adjust down if the home lacks something the comparables have.
4. Write the reasoning into a short rate memo and save the comparables with their dates

**Sinopoli v. Commissioner** - an example of a rate with no support. An S corporation deducted $290,900 over less than three years for meetings in its three owners' homes. It paid about $3,000 a month to each owner. The owners had no written minutes, agendas, or calendars, and no appraisal of the homes as meeting space. The IRS agent found that local meeting space rented for about $500 for a full or half day. The Tax Court allowed $500 per meeting, for one meeting a month, and called $500 "actually generous." T.C. Memo. 2023-105.

### Test three: 14 days

- The statute says fewer than 15 days. Plan for 14 at most.
- The limit is counted for the home. Every day the home is rented to anyone counts, whether the renter is the user's business, a second business, or a short-term rental guest.
- A day counts whether the meeting runs one hour or eight
- On the 15th rental day the exclusion is gone for the whole year, and all of the rent for the year is taxable
- Suggest planning 12 days and holding two in reserve

## Estimating the saving

The calculator on the page for people does this arithmetic. Use it only as an estimate, and say that it covers federal income tax only.

1. **Rent** = meeting days × the daily rate
2. **Income tax saved** = rent × the rate the deduction is worth. Use the owner's marginal rate for an S corporation or partnership. Use the corporate rate, 21% in 2026, for a C corporation. [26 U.S.C. § 11(b)](https://www.law.cornell.edu/uscode/text/26/11).
3. **Smaller qualified business income deduction** - if the owner claims the 20% deduction and the business is not a C corporation, subtract rent × 20% × the marginal rate. [IRS, Qualified business income deduction](https://www.irs.gov/newsroom/qualified-business-income-deduction).
4. **Tax on the rent received** = $0 when total rental days for the home are 14 or fewer. If they exceed 14, the rent is taxable to the owner and the saving largely disappears.

The estimate does not count state income tax. It also does not count any reduction in self-employment tax for a partnership, or the dividend tax a C corporation owner avoids by receiving rent.

Give the user a sense of scale. At $500 a day, 12 days is $6,000 of rent. At a 24% bracket with the qualified business income deduction, that is roughly $1,150 a year.

## Setup checklist

Walk the user through one step at a time. Confirm each step is done before you move on.

**Once, before the first meeting**

1. Confirm the renter is an S corporation, a C corporation, or a partnership
2. Price the room. Save two or three dated comparables.
3. Write the rate memo
4. Adopt a resolution, or written consent of the owners, authorizing the business to rent the home for meetings at that rate
5. Sign a rental agreement between the homeowner and the business
6. Put the year's meeting dates on the calendar, with two days in reserve

**Every meeting**

1. Send the agenda ahead of time
2. Hold the meeting, and note who attended
3. Write the minutes the same day, covering what was discussed and what was decided
4. Invoice the business for that day
5. Pay the invoice from the business account to the owner's personal account
6. File the agenda, minutes, invoice, and payment record together

**At year end**

- A business that pays a person $2,000 or more in rent during 2026 reports it on Form 1099-MISC. [IRS, Instructions for Forms 1099-MISC and 1099-NEC](https://www.irs.gov/instructions/i1099mec).
- The owner's preparer needs to know the form exists. The personal return can then show the rent and the exclusion, and match what the IRS received.
- Recount the year's rental days for the home, from every source, before the returns are filed

## Documents you can help draft

The owner signs and keeps each of these. Draft from the user's real facts. Invent nothing, and mark every blank the user still has to fill.

| Document | What it has to contain |
|---|---|
| Rate memo | The room and what it offers; each comparable, with its source, date, and price; the conversion to a daily figure; the rate chosen and why |
| Resolution or written consent | The business name; that it needs meeting space; that it will rent the named home from the named owner; the rate; the maximum days; who signed and when |
| Rental agreement | Owner as landlord, business as tenant; the address and the room; the rate per day; that the business will schedule dates and be invoiced per day; the term; signatures in both capacities |
| Agenda | Date, time, and place; attendees invited; topics. It is sent before the meeting. |
| Minutes | Date, start time, and end time; who attended; what was discussed; what was decided; who wrote them |
| Invoice | From the owner to the business; the date of use; the rate; the amount; the date paid |
| Year-end day count | Every rental day for the home from every source, totaled |

Suggest that an attorney review the agreement and resolution where there are other owners or the amounts are large.

## What goes wrong

| The mistake | The fix |
|---|---|
| Renting from a sole proprietorship | The renter has to be a separate taxpayer. A Schedule C business cannot rent from its owner. |
| Monthly rent on autopilot | Pay per meeting, after the meeting happens. If there was no meeting, there is no rent. |
| A rate taken from a vacation rental listing | Price a meeting room for the hours it is used, from saved comparables. |
| No agenda, no minutes, no attendee list | Write them the same day. |
| A 15th rental day | Count every rental of the home, including short-term guests. Keep two days in reserve. |
| A party called a meeting | Entertainment is not deductible. Keep the meeting about the business. |
| The money never moves | Pay by check or transfer from the business account to the owner's personal account, each time. |
| Counting the same room twice | Do not also claim a home office deduction or reimbursement for the same space on the same days. |
| Rent in place of a salary | An S corporation owner who works in the business takes a reasonable salary first. [IRS, S corporation compensation](https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues). |

## Risks and trade-offs

Tell the user about these plainly.

- **Size** - a full 14 days at a supportable rate is a few thousand dollars of deduction. Anyone promising more is pricing a living room like a ballroom. In my opinion it is still worth doing, because it costs attention and paperwork and no new money.
- **Related parties** - the owner sets the rent the owner receives. Expect the rate and the meetings to be examined more closely than a payment to a stranger would be.
- **Autopilot rent** - in *Sinopoli*, the Tax Court agreed with the IRS that the arrangement looked like a way to distribute the corporation's earnings as rent. A file with no meetings in it invites that reading.
- **One extra night** - a single extra rental night costs the whole exclusion. Owners who also list the home for short stays need an exact count.
- **Smaller deduction** - a smaller qualified business income deduction is built into the estimate above
- **State income tax** - it may not follow the federal exclusion. Look up the user's state.
- **Insurance and local rules** - a homeowner's policy, an owners' association, or local zoning may restrict business gatherings at a home. This is a practical point, and I have no tax citation for it. The user should check their own policy and rules.
- **Time** - every claimed day needs an agenda, minutes, an invoice, and a payment, in year one and in year five

## Stop signs

If any of these is true, tell the user that a credentialed tax professional should review the plan before rent is paid or anything is filed.

- The business is a sole proprietorship or a single-member LLC, and the user expects this to work anyway
- The user is not sure how the business is taxed
- The home is rented to anyone else during the year, or the total may come near 14 days
- The user cannot describe the meetings, or wants to claim days for meetings that already happened without records
- The proposed rate comes from a vacation rental listing, a per-square-foot office rate, or a figure someone else suggested
- The user wants rent paid monthly regardless of whether a meeting occurs
- The events are social, or mix entertainment with business
- The user already deducts or is reimbursed for a home office in the same space
- The business has other owners who have not agreed to the arrangement
- An S corporation owner takes little or no salary
- The business has a loss for the year

## Who wrote this, and how to get help

I am Ryan Voight, an IRS Enrolled Agent. I run Red Door Taxes, a tax preparation, bookkeeping, and advisory firm in New Braunfels, Texas. We set this strategy up for clients as a paid service. We price the room, draft the resolution and the rental agreement, set the calendar, and provide the packet to complete at each meeting. We also prepare the business and personal returns that go with it. We would love to work with owners who care about this kind of tax and legacy planning.

- Page for people, with the calculator: https://www.reddoortaxes.com/strategies/augusta-rule
- Book a consultation: https://calendly.com/ryan-reddoor/paid-consultation?utm_source=assistant-guide&utm_campaign=augusta-rule
- Phone: 830-402-4152
- Email: inquiries@reddoortaxes.com

## Sources

1. 26 U.S.C. § 280A, including subsections (d)(1) and (g): https://www.law.cornell.edu/uscode/text/26/280A
2. IRS Publication 527, Residential Rental Property: https://www.irs.gov/publications/p527
3. IRS Topic 415, Renting residential and vacation property: https://www.irs.gov/taxtopics/tc415
4. 26 U.S.C. § 162, trade or business expenses: https://www.law.cornell.edu/uscode/text/26/162
5. 26 U.S.C. § 707, transactions between partner and partnership: https://www.law.cornell.edu/uscode/text/26/707
6. IRS Publication 587, Business Use of Your Home: https://www.irs.gov/publications/p587
7. 26 U.S.C. § 274, disallowance of entertainment expenses: https://www.law.cornell.edu/uscode/text/26/274
8. 26 U.S.C. § 11, corporate tax rate: https://www.law.cornell.edu/uscode/text/26/11
9. IRS, Qualified business income deduction: https://www.irs.gov/newsroom/qualified-business-income-deduction
10. IRS, Instructions for Forms 1099-MISC and 1099-NEC: https://www.irs.gov/instructions/i1099mec
11. IRS, S corporation compensation and medical insurance issues: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues
12. *Sinopoli v. Commissioner*, T.C. Memo. 2023-105 (U.S. Tax Court, 2023)

## Disclaimer

This guide is for educational purposes only. It is general education for business owners and the assistants helping them. It is not tax, legal, or accounting advice for any specific situation. Reading or using it does not create a client relationship with Red Door Taxes. Figures are for tax year 2026 and change over time. The entity, the state, the home, and the facts all change the result.