AUGUSTARULE
A real rule that is widely abused
The tax code lets you rent out your home for up to 14 days a year and pay no federal income tax on the rent. Your business can be the renter if it has a real reason to meet there. The business deducts the rent, and you receive it tax free. At $500 a day for 12 meetings, that is worth about $1,150 a year in the 24 percent bracket. The version on social media skips the meeting, the market rate, and the records. Those are the first things an examiner asks for.
The number is small. In our opinion it is still worth doing, because of what it costs you. Most tax savings ask you to part with money. A 401(k) locks it away, and paying your children hands it to them. This one moves money you were already going to spend from your business to you, and it comes with a deduction. You are trading attention and paperwork for pure savings.
What would this save you?
The saving is the rent your business can honestly deduct, multiplied by your tax rate. Two numbers drive it: how many real meetings you hold, and what a comparable room rents for near you. Nothing you enter here is saved or sent anywhere. The result is an educational estimate. It is not tax advice for your situation.
Your situation
This year’s figures
The 14-day limit is written into the statute and does not change with inflation.
What it saves
The same rent, four renters
| Renter | Net annual saving |
|---|
The rule underneath all of it
Two separate rules do the work, and they belong to two separate taxpayers. You are the homeowner. If you live in the home and rent it for fewer than 15 days in the year, the rent is not income to you. You also deduct nothing for the rental. Your business is the renter. It deducts rent for property it uses when the expense is ordinary, necessary, and reasonable in amount.
That is why the kind of business matters. The renter has to be a different taxpayer from the owner of the home.
S corporation or C corporation
WorksThe corporation is its own taxpayer. It rents the room from you, holds its meeting, and deducts the rent. You receive the rent personally and leave it out of your income.
Partnership or multi-member LLC
WorksA partnership can rent property from one of its partners. Treat it the way you would treat renting from a stranger: a written agreement, a market rate, and the other partners aware of it.
Sole proprietorship or single-member LLC
Does not workA Schedule C business is the same taxpayer as its owner. You cannot pay yourself rent and deduct it. If this is your business, the home office deduction is the tool that fits.
A real meeting, a market rate, and 14 days
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. A meeting you can describe in a sentence, with an agenda before and minutes after, holds up. A dinner where business came up does not.
| 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 your accountant, attorney, or advisor | Monthly rent with no agenda, no minutes, and no one who remembers attending |
Test two: the rent is reasonable
Reasonable means what you would pay an unrelated owner for a comparable room for the same length of time. Price the room you actually use, for the hours you use it. 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 your group | Written quote or published rate sheet |
| Event space or coworking meeting room | Hourly rate, times the hours you meet | Dated screenshot of the listing |
| Private home offered for meetings | Hourly rate for similar capacity and amenities | Dated screenshots of two or three listings |
Test three: 14 days
The limit is counted for the home. Every day the home is rented to anyone counts, whether the renter is your business, a second business, or a short-term rental guest. On the 15th day the exclusion is gone for the whole year, and every dollar of rent is taxable.
Setup, and what you keep
Once, before the first meeting
- Confirm the renter. It has to be an S corporation, a C corporation, or a partnership.
- Price the room. Save two or three dated comparables.
- Write a short rate memo that gets from the comparables to your number
- Adopt a resolution authorizing the business to rent the home for meetings at that rate
- Sign a rental agreement between you and the business
- Calendar the year. Leave two days in reserve.
Every meeting
- Send the agenda ahead of time
- Hold the meeting, and note who attended
- Write the minutes the same day
- Invoice the business for that day
- Pay it from the business account to your personal account
- File the agenda, minutes, invoice, and payment together
What goes wrong
You can do the version you see on social media and risk having it thrown out on audit. Or you can frame it up so it stays effective. Here is what the first version looks like.
| 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 you use it, from comparables you saved. |
| 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 your 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. |
Working through this with an AI assistant?
Paste this into Claude, ChatGPT, or whichever assistant you use. It points your assistant at our full guide to this strategy. The guide covers the rules and their sources, this year’s figures, the setup steps, the paperwork, and the risks. It also tells the assistant when to send you to a professional. Nothing is held back.
Read https://www.reddoortaxes.com/guides/augusta-rule.md from Red Door Taxes. I own a business and I am thinking about having it rent my home for business meetings under the Augusta Rule. Using that guide, ask me its intake questions one at a time, tell me whether my business qualifies and what could go wrong, help me set a daily rate I can support, then walk me through the setup and the records for each meeting. Tell me plainly when the guide says to stop and get a professional.
The guide is a plain page that anyone can read: open the guide. It states the same rules and the same figures as this page, with a source for each.
The records are what make this hold up
A defensible version of this runs on paper. You need a rate memo with comparables, a resolution, and a rental agreement. You also need an agenda, minutes, an invoice, and a payment for every meeting. Everything you need to run it yourself is on this page, and nothing is held back. If you would rather hand it off, implementation is a paid service. We price the room, draft the resolution and the agreement, set the calendar, and give you the packet to fill in 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.
Book a consultationAbout Red Door
Red Door Taxes was founded after I was taken advantage of by a lazy and unscrupulous tax preparer when I was a new business owner. The preparer explained nothing about business ownership, write-offs, business structure, or how to avoid a big tax bill at the end of the year. I was so frustrated with the experience that I enrolled in accounting classes so that I could prepare my own taxes. I have been preparing taxes professionally since 2011 and have been an enrolled agent since 2017.
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Ryan of Red Door Taxes is the best tax preparer I have ever used. He provides professional, knowledgeable service that inspires confidence. I have relied on him for years and highly recommend him for both business and personal tax needs.
Ryan has been doing our taxes for a few years now. He takes the time to understand our family goals and uses his expertise to ensure our returns are tailored to our needs. You simply can't go wrong with Ryan; he has earned our highest recommendation!
As an Enrolled Agent, Ryan is extremely knowledgeable about the specific deductions our family was eligible for and helped us navigate tax implications from home sales and investments. He answered all our questions, referencing the applicable rules, and provided future planning advice.
For educational purposes only. This page and its calculator are general education for business owners. They are not tax, legal, or accounting advice for your specific situation, and reading them does not create a client relationship with Red Door Taxes. The calculator estimates federal income tax only. It ignores state income tax. It also does not count any change in self-employment tax for a partnership or in dividend tax for a C corporation. Your entity, your state, your home, and what comparable space rents for near you all change the result. Nothing you enter in the calculator is saved or transmitted. Bring us your facts before you act on any of it.