A Guide to the Augusta Rule (Section 280A) for Renting Your Home to Your Business

What Exactly Is the Augusta Rule (and Why Should You Care)?#

Section 280A(g), often called the Augusta Rule, can let you exclude rent from income when you rent a home you also use as a residence for less than 15 days in the tax year. In a common setup, you rent your home to a separate business entity for a real business event at a supportable fair rate. The entity may treat the payment as a business expense, and you may exclude the rent personally if the requirements are met.

This works or fails on execution, not on clever framing. You need a legitimate business purpose. The rent amount must be fair under the facts and circumstances. You also need clean separation between you and the paying entity, plus records that show what happened, why it was business-related, and how you set the rate.

Start with a quick self-screen before you start the paperwork. If you run an S corporation or other corporation, entity separation is often easier to document. If you are a sole proprietor, or you use a single-member LLC that is still disregarded for federal income tax, the dual-benefit result is less straightforward unless you elected corporate treatment, for example with Form 8832.

If you clear that screen, the rest is a three-step process: document the decision, execute the transaction cleanly, and make sure reporting matches the file. Related: A Guide to the Qualified Business Income (QBI) Deduction for Freelancers.

Step 1: Justify & Document - Building Your Audit-Proof Foundation#

Do Step 1 before any payment. Build a file that documents three things: there was a real business event, the rent was supportable as fair market rent, and the company formally approved the expense. If any one of those is weak, fix it now before moving to Step 2.

Your file should answer three questions:

• Why did the business need this event?
• How did you set the rent?
• Who approved it as a business expense?

Apply a real business-purpose test#

A real business purpose is more than calling something a "meeting." Put the event, the business reason, and the expected output in writing before it happens.

Use a simple test: would a third party understand why the event happened, why your residence was used, and what decision or deliverable came out of it? If not, your rationale is too vague.

Write a short rationale memo with the event name, date, location, attendees, business need, and expected output. Tie the event to a concrete result, such as approved decisions or a planning deliverable for the next 12-24 months, and create the rationale before payment.

Build a fair-market-rent file, not a guessed number#

Support the amount with documentation showing it reflects fair market rent, and keep a dated note explaining how you arrived at the rate. Comparables can help, but this guidance does not require a specific number of comparables or one mandatory valuation method.

Do not choose a number first and backfill support later. If you plan multiple rental days, track the total so you do not drift into 15 days, where rental income becomes taxable.

Approve it like a real company decision#

Once the purpose and rent support are documented, record approval in meeting minutes or a similar authorization record. The point is to show an arm's-length transaction that the business approved as an ordinary and necessary expense.

Your authorization record can include:

• Meeting date and attendees
• Specific event being approved
• Event date and property location
• Approved rental amount and how you set it
• Business-purpose summary
• Approval outcome, for example motion, second, and result if that is your format

Each field should map cleanly to the documents you create next.

If personal and business use is hard to separate or your documentation is weak, bring in a tax professional before you transact. You might also find this useful: A Guide to the Lifetime Learning Credit for Freelancers.

Step 2: Execute & Transact - Creating an Unimpeachable Paper Trail#

This is the control point. Your records should read like a normal third-party rental, with clear proof of who was paid, how much, when, and for what business use.

Use the same sequence every time: agreement -> invoice -> payment -> event proof. Keep the event name, date, property, and rent amount consistent across every document. Make sure those details match Step 1.

Start with the agreement#

Put the agreement in place before the event so the transaction holds together from the start. The IRS does not prescribe one required lease format for every Section 280A(g) self-rental, but documentary support is still required.

Practical fields checklist:

• legal names of homeowner and business
• property address
• rental date or date range
• event name and business purpose
• rental amount
• payment terms
• signature lines for both sides
• date signed

If Step 1 approval says one event and one amount, the agreement should say exactly the same. Keep the rent support reasonable in the same way you would if paying an unrelated party.

Keep invoice hygiene boring and consistent#

Issue an event-specific invoice that ties back to the agreement. Boring is good here. Use consistent naming and wording so the transaction lines up in accounting and in your support file.

A strong description is specific, not generic, and should point back to the signed agreement. Record the transaction promptly in your ledger or journal, and keep naming consistent across files.

Move the money cleanly#

Use a traceable payment method and keep proof of payment with the invoice. Your file should show the payee, amount, and payment date, with support such as a canceled check, transfer confirmation, deposit slip, or receipt. Electronic records are fine, but they need to be just as complete as paper records.

Capture the proof bundle#

There is no IRS-mandated Section 280A(g) "meeting packet," but keeping a tight proof bundle makes the file easier to defend.

Consider keeping:

• agenda or meeting outline
• attendee record, or calendar invite list
• work output, such as slides, notes, or a decision memo
• agreement, invoice, and payment proof in one folder

Store files in one location with a consistent naming pattern, and record transactions daily where practical. Retain records through at least the general 3-year assessment window, and track rental days so you stay within the fewer than 15 days rule. For a step-by-step walkthrough, see How to Choose the Right Business Structure for Your Freelance Business.

Step 3: Comply & Report - Finalizing Your CFO-Level Strategy#

At this stage, sloppy or inconsistent execution is a major audit risk. Your books, return-prep notes, and support file should tell one clear story: a real business rental, a market-based rate, a legitimate business purpose, and no more than 14 rental days for the year.

Reporting checklist#

Run this checklist before filing:

Audit file map#

Use this map so each claim has clear proof and each proof item addresses a known review risk.

Reconcile before filing#

Before you send anything to your preparer, do one reconciliation pass. Match these four fields across the agreement, invoice, payment record, and bookkeeping entry: event name, date, amount, and property. If any field does not match, correct it or add a short memo that explains why.

Then confirm your day count. The treatment described here depends on staying at 14 days or less for the year, so crossing into day 15 creates a different reporting fact pattern.

When to bring in a pro#

Get targeted tax help if any of these apply:

• your entity changed during the year, ownership changed, or the payer entity does not match the agreement
• your facts are mixed-use or close to qualification limits, including personal-use questions
• your records are inconsistent, late-created, or missing core items, for example payment proof or market-rent support
• you are unclear how to classify the business expense or how qualifying personal-side treatment should be handled on the return

For related context, see How to Make the 'Section 962 Election' for Individual CFC Shareholders.

Before you finalize your file, compare your event-based Section 280A treatment against your regular workspace write-offs with the Home Office Deduction Calculator.

From Tax Loophole to Strategic Tool: Final Thoughts#

A conservative way to approach Section 280A(g) is to treat it as a records-first tax position, not a shortcut. If you cannot show why the event happened, how you set the rate, and how payment and reporting align, pause and resolve the gaps before proceeding.

Keep the same three-step approach every time:

1. Justify and document before money moves.
2. Execute with clean, traceable records.
3. Report only what your file can still support later.

Use a cautious default before treating results as final. The excerpts here do not establish federal Section 280A mechanics, a required documentation set, or multi-state/cross-border outcomes. At the state/local level, Virginia's Title 58.1, Subtitle III covers local taxes, and county taxes may be set as late as a regular or called meeting in June. If local law affects your position, keep a copy of what you relied on, including a saved statute page or a portal-generated PDF report.

Escalate to a tax professional before payment if your entity setup changed during the year, your pricing support is thin, or your filing posture spans multiple states, localities, or countries.

If you want a deeper dive, read Do I Have to Pay State Taxes While Living Abroad as a Digital Nomad?.

If your setup spans entities or jurisdictions, use Contact Gruv to confirm which compliance and recordkeeping workflows are enabled for your program.