The Augusta Rule for S Corp Owners: How to Rent Your Home to Your Business Tax-Free.

A consulting firm owner in Utah County runs her business through an S corporation and hosts her quarterly planning sessions, the year-end review, and a couple of all-hands strategy days at her own house instead of booking a hotel conference room. She is already doing the thing the tax code rewards. She just isn't getting paid for it. The Augusta rule for S corp owners lets her business pay her rent for those days, deduct the rent, and let her receive the money completely free of federal income tax. The strategy is easy to describe and easy to do wrong, and the Tax Court has already made an example of taxpayers who overreached.

The rule lives in IRC §280A(g). It is two sentences long, and it is sometimes called the Masters rule because homeowners near Augusta National rent their houses to spectators during the golf tournament each April and pocket the income tax-free. The statute says that if you use a dwelling as a residence and rent it for fewer than 15 days during the year, you get no deduction for the rental use, and the rental income is not included in your gross income under §61. Fourteen days or fewer, and the money is yours, untaxed.

On its own, §280A(g) is a quirk that benefits people who happen to live near a stadium or a major event. The planning move is to combine it with a separate business you control. Your S corporation needs space for board meetings, strategy retreats, planning sessions, and recorded trainings. Instead of renting a hotel conference room, the corporation rents your home for those days at a fair rate. The corporation takes an ordinary and necessary business expense deduction under IRC §162. You, the homeowner, exclude the same dollars under §280A(g). The deduction is real on one return and the income disappears on the other.

The strategy depends on the business being a different taxpayer than you. An S corporation files its own Form 1120-S and is a separate person for tax purposes, so rent it pays to its shareholder is a real transaction: a deduction on the corporation's return and excluded income on yours. A sole proprietor or a single-member LLC reporting on Schedule C cannot use the rule, because the business and the owner are the same taxpayer. Paying rent to yourself produces no deductible payment and nothing to exclude. The same separate-entity logic lets partnerships and C corporations use the rule too, but the S corporation is the common case because so many small business owners already operate as one.

The rent has to be reasonable, and that word does a lot of work. A reasonable rent for your home as meeting space is what an unrelated business would pay to rent comparable space in your area for the same use, not a number you picked because it produces a nice deduction. The clean way to support it is to gather written quotes from hotels, conference centers, and event venues nearby for a full-day meeting room with the amenities your home provides, then keep those quotes in the file before you set the rate. If local venues quote $1,200 to $1,800 for a full-day room, a rate in that range for comparable space in your home is defensible. A rate several times the going venue rate is not.

Sinopoli v. Commissioner, T.C. Memo 2023-105, decided in August 2023, is the case every S corporation owner using this strategy should read. Three owners of an S corporation called Planet LA, LLC had the corporation pay each of them $3,000 a month to rent their homes for company meetings, and the corporation deducted more than $290,000 of rent across 2015, 2016, and 2017. The Tax Court was not persuaded. It allowed $500 per meeting, and only for the meetings the owners could actually substantiate. They produced no documentation at all for 2015, notes for 12 meetings in 2016, and 9 in 2017. The court allowed nothing for 2015, $6,000 for 2016, and $4,500 for 2017. The $290,000 deduction collapsed to $10,500.

Two failures sank the deduction, and both were avoidable. First, the owners never established that $3,000 a meeting was a market rate. They obtained no appraisal and offered no comparable venue pricing, so the court substituted what it found reasonable, $500. Second, they could not prove the meetings happened. No minutes, no agendas, no calendars. The lesson is not that the Augusta rule failed. It worked, for the meetings that were documented at a rate the court accepted. The lesson is that a number on an invoice is not a deduction. The documentation is the deduction.

Treat each rental the way you would treat an arm's-length deal with an unrelated landlord. Before the year starts, set the rate from written comparables. For every meeting, keep an agenda, minutes or notes showing real business was conducted, the date, and who attended. Have the corporation issue a written rental invoice and pay by check or transfer, not a year-end journal entry. Keep the day count at 14 or fewer across the whole year, because day 15 flips the entire arrangement into taxable rental income reported on Schedule E and the exclusion is gone.

When the corporation pays $600 or more of rent to you in a year, it generally files a Form 1099-MISC reporting the rent in box 1. You still exclude the income under §280A(g), and you do not report it on Schedule E. Because Utah starts its individual income tax from federal taxable income, dollars you exclude federally are also excluded for Utah, and the corporation's deduction flows through on your Utah return at the 4.5% rate for tax year 2025. The strategy is modest in size, a few thousand dollars of tax a year rather than a six-figure swing. It pairs naturally with the larger moves I write about for business owners, like the Section 174 small business R&D refund and the real estate depreciation strategies high earners use, which turn on the same §280A dwelling-unit rules. The small deductions add up.