It sounds too good to be true, but the Augusta Rule (Section 280A(g) of the IRC) is a legitimate, IRS-recognized strategy that lets business owners create a deduction for their company and receive tax-free income personally.
Here’s how it works:
Your business rents your home for legitimate business purposes — board meetings, planning sessions, strategy retreats. You charge fair market rent. The business deducts the expense. You exclude the income on your personal return because the rental period is under 15 days.
It’s a true “double benefit” — deduction on one side, exclusion on the other.
But here’s where people get into trouble:
This strategy requires a separate taxpayer paying rent. It works for S-Corps, C-Corps, and partnerships. If you’re a sole proprietor or single-member LLC, you and your business are the same taxpayer — the IRS is unlikely to respect this arrangement.
You also need:
- A legitimate business purpose for every meeting (not your kid’s birthday party rebranded as “team building”)
- Corporate minutes or meeting notes for each event
- Fair market value pricing supported by local venue comparables — get actual quotes from hotels and coworking spaces in your area
- An invoice and a traceable payment from the business account
- A 1099-MISC filed by the business if total rent paid exceeds $600
The documentation piece is where most people fail. And the IRS knows this strategy gets abused, so audit-proofing your records is essential.
When does this make sense?
If you own a home and operate an S-Corp or C-Corp that genuinely holds meetings, this is low-hanging fruit. Even at a modest $500–$1,000/day in comparable venue rates, 10–12 sessions per year can generate $5,000–$12,000 in tax-free income with a matching business deduction.
It’s not life-changing money for most people. But it’s real savings, it’s clean, and it’s one of the foundational strategies you should have in place before moving to anything more complex.
Meet the Authors
David Snider
David Snider is the Founder & CEO of Harness, a platform to power entrepreneurial tax advisors & their clients. Harness was recognized by Inc Magazine as one of the 200 fastest growing companies in the U.S. David incubated Harness as an executive-in-residence at Bain Capital Ventures. Previously he served as COO & CFO of Compass, a real estate tech company that he helped grow from pre-launch to a valuation of $1.8 billion. David was an investor at Bain Capital private equity, where he completed investments worth over $2 billion as well as the IPO of Sensata on the NYSE. He is the author of Money Makers, published by Macmillan.
This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, the reader is encouraged to consult with the professional advisor of their choosing.
