Augusta Rule: Tax-Free Short-Term Home Rentals
Question: Tell me about the Augusta rule?
Quick answer: The "Augusta rule" lets you rent out your home for fewer than 15 days a year completely tax-free — you don't report the rental income, but you also can't deduct rental expenses for those days. It's named after Augusta, Georgia (home of the Masters golf tournament), where homeowners have long rented out their houses for a few days during the tournament.
How it works
Under IRC Section 280A(g), if a dwelling unit is used as a residence and rented out for fewer than 15 days during the tax year, the rental income is excluded from gross income entirely and no rental-expense deductions are allowed. This provision is popularly called the "Augusta rule" or "Masters exemption."
IRS Publication 527 confirms this: if you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function isn't considered to be rental and it shouldn't be reported on Schedule E (Form 1040). You aren't required to report the rental income and rental expenses from this activity.
Importantly, this doesn't affect your normal deductions — any expenses related to the home, such as mortgage interest, property taxes, and any qualified casualty loss, will be reported as normally allowed on Schedule A (Form 1040).
This rule applies to 2025 and 2026 and was unchanged by P.L. 119-21 (the One Big Beautiful Bill Act).
The 15-day cliff
There's no partial benefit — once you hit 15 rental days, the exclusion disappears entirely: at 15 or more rental days, the exclusion is gone: all rental income is reportable and the vacation-home expense-allocation rules of sec. 280A apply instead.
A common (but risky) planning use: renting to your own business
Some business owners rent their home to their own company for meetings or retreats, aiming to deduct the rent as a business expense while excluding the income personally. The owner rents their home to their own business for occasional meetings or retreats (14 days or fewer per year). Done correctly, the business deducts reasonable rent as an ordinary and necessary expense under sec. 162 and the owner excludes the income under sec. 280A(g).
However, the IRS scrutinizes this arrangement between related parties. In one case, Sinopoli v. Commissioner, T.C. Memo. 2023-105, the Tax Court cut claimed rent of approximately $3,000 per meeting to about $500 where the taxpayers had no comparable-rate evidence and thin proof the meetings occurred.
If you try this, keep solid documentation: a written rental agreement between owner and entity; fair-rental-value evidence gathered contemporaneously — quotes for comparable meeting space in the same market; a genuine business purpose for each rental day (agenda, attendees, minutes); and actual payment from the entity to the owner, with a day count kept safely under 15.
What it depends on:
- Whether the property is genuinely used as your personal residence
- Actual number of days rented (must stay under 15)
- If used for a business-meeting strategy, whether rent charged is at fair market value with solid documentation
Given the IRS's scrutiny of related-party rental arrangements and the fact-specific documentation required, it's worth talking to a CPA before using the Augusta rule for a business-meeting strategy.
Sources relied upon
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Renting Your Home Fewer Than 15 Days — IRC Section 280A(g) (the "Augusta Rule")
· see it highlighted in context
“**Summary:** If a dwelling unit is used as a residence and rented out for fewer than 15 days during the tax year, the rental income is excluded from gross income entirely and no rental-expense deductions are allowed — IRC sec. 280A(g).”
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Renting Your Home Fewer Than 15 Days — IRC Section 280A(g) (the "Augusta Rule")
· see it highlighted in context
“This is the provision popularly called the "Augusta rule" or "Masters exemption."”
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IRS Publication 527 — Residential Rental Property, p. 28
· see it highlighted in context
· official source (p. 28) ↗
“Used as a home but rented less than 15 days. If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function isn’t consid- ered to be rental and it shouldn’t be reported on Sched- ule E (Form 1040). Y ou aren’t required to report the rental income and rental expenses from this activity.”
-
IRS Publication 527 — Residential Rental Property, p. 28
· see it highlighted in context
· official source (p. 28) ↗
“Any expen- ses related to the home, such as mortgage interest, prop- erty taxes, and any qualified casualty loss, will be reported as normally allowed on Schedule A (Form 1040).”
-
Renting Your Home Fewer Than 15 Days — IRC Section 280A(g) (the "Augusta Rule")
· see it highlighted in context
“Applies to tax years 2025 and 2026 (rule unchanged by P.L. 119-21).”
-
Renting Your Home Fewer Than 15 Days — IRC Section 280A(g) (the "Augusta Rule")
· see it highlighted in context
“- At 15 or more rental days, the exclusion is gone: **all** rental income is reportable and the vacation-home expense-allocation rules of sec. 280A apply instead.”
-
Renting Your Home Fewer Than 15 Days — IRC Section 280A(g) (the "Augusta Rule")
· see it highlighted in context
“A common planning use: the owner rents their home to their own business for occasional meetings or retreats (14 days or fewer per year). Done correctly, the business deducts reasonable rent as an ordinary and necessary expense under sec. 162 and the owner excludes the income under sec. 280A(g).”
-
Renting Your Home Fewer Than 15 Days — IRC Section 280A(g) (the "Augusta Rule")
· see it highlighted in context
“The IRS scrutinizes this arrangement between related parties.”
-
Renting Your Home Fewer Than 15 Days — IRC Section 280A(g) (the "Augusta Rule")
· see it highlighted in context
“In *Sinopoli v. Commissioner*, T.C. Memo. 2023-105, the Tax Court cut claimed rent of approximately $3,000 per meeting to about $500 where the taxpayers had no comparable-rate evidence and thin proof the meetings occurred.”
-
Renting Your Home Fewer Than 15 Days — IRC Section 280A(g) (the "Augusta Rule")
· see it highlighted in context
“Minimum file documentation for clients using this strategy: - A written rental agreement between owner and entity. - **Fair-rental-value evidence** gathered contemporaneously — quotes for comparable meeting space (hotels, event rooms) in the same market. - A genuine business purpose for each rental day: agenda, attendees, and minutes or notes for every meeting. - Actual payment from the entity…”
Quoted passages are extracted verbatim from the source documents by the citation system — they cannot be fabricated by the AI.
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