How the Augusta Rule Works: 14-Day Limit, Fair Rent, and 1099s

The Augusta Rule lets you rent out a home you use as a residence for fewer than 15 days in a tax year and keep every dollar of that rental income out of your federal gross income. It comes from Internal Revenue Code Section 280A(g), and it takes its nickname from homeowners near the Masters Golf Tournament who rented their houses during tournament week. The tradeoff is straightforward: the income is tax-free, but you cannot deduct any expenses tied to those rental days.¹

The 14-Day Limit and the Personal-Use Test

The exclusion turns on a strict day count. Rent the property for 14 days or fewer during the year and the income is not included in your gross income. Rent it for 15 days or more and the entire exclusion disappears. At that point every dollar becomes reportable, and you have to allocate expenses between personal and rental use on Schedule E.² The days don’t have to be consecutive. Any day or partial day the property is rented at a fair market rate counts toward the 14.¹

The property also has to be one you actually use as a residence during the year. The IRS test is personal use for the greater of 14 days or 10 percent of the days the property is rented at a fair price.³ If you’re renting out the home you live in, this is easy to meet. It matters more for vacation properties where your own use might be limited.

The rule covers any dwelling unit you use as a residence, which the IRS reads broadly to include houses, apartments, condos, mobile homes, and boats with basic living accommodations. A portion of a property operated exclusively as a hotel, motel, inn, or similar commercial lodging does not qualify.⁴

When you qualify, you don’t report the income on Form 1040 and you don’t file Schedule E for the rental. You also can’t deduct cleaning, extra utilities, a share of depreciation, or anything else tied to the rental use. The statute is explicit about that.¹

Charging Fair Market Rent

The rent has to reflect what an unrelated person would pay for comparable short-term use of the property. This requirement exists to prevent inflated rates being used to shift money around, particularly between a business and its owner.

The most practical way to establish fair market value is to pull comparable listings from Airbnb or VRBO for properties of similar size, condition, and location during the same time period. Save the screenshots or printouts. You want evidence that existed at the time of the rental, not comparisons built after the fact. If short-term rentals in your neighborhood regularly command $500 a night, $500 is defensible. Charging $3,000 for that same home would need a much stronger justification.

When the amounts get larger, such as a corporation renting a shareholder’s home for a multi-day retreat, a written appraisal or formal market study offers meaningful protection. Tax courts reviewing fair market value disputes lean on well-documented appraisals from qualified experts and favor evidence drawn from comparable public transactions.⁵ A one-page printout of listings might be fine for a casual weekend booking. A $20,000 corporate retreat calls for something more rigorous.

Renting Your Home to Your Own Business

One of the most common uses of the Augusta Rule is a business owner renting their personal residence to their own company for meetings, retreats, or planning sessions. Structured correctly, the homeowner receives tax-free rental income and the business deducts the payment as an ordinary and necessary business expense under IRC Section 162.⁵

This is also where the IRS pays the closest attention. The arrangement needs real business substance behind it, not paperwork designed to move money from a corporate account to a personal one. Board meetings, strategic planning retreats, employee training, and client presentations all support a legitimate rental. The activity should be one that would have happened somewhere anyway, whether a conference room or a hotel meeting space, and renting your home was a reasonable alternative.

The documentation bar is higher for these related-party rentals. You want a written rental agreement covering the dates, payment amount, and business purpose. Meeting agendas and minutes should exist and show actual business discussion, such as reviewing financial performance, planning marketing strategy, or analyzing staffing. The rent must actually be paid by check or transfer from the business account to the homeowner, the way any arm’s-length transaction would move. The rate has to line up with local comparables.

The Tax Court case Sinopoli v. Commissioner illustrated what happens when the paper trail is thin. Without written minutes, agendas, or calendars confirming that claimed meetings actually took place, the rental deductions were challenged. Treat the transaction like a real one, because the IRS will.

What to Do When You Receive a 1099-MISC

For tax years beginning after 2025, a business that pays you $2,000 or more in rent has to report the payment to the IRS on Form 1099-MISC. Before 2026, the threshold was $600.⁶ The higher figure means fewer Augusta Rule rentals will trigger a form, but corporate retreats and event-weekend bookings still often will.

The problem is mechanical. The IRS matching system sees the 1099-MISC and expects the income to appear somewhere on your return. If it doesn’t, you may get an automated notice. The income is still legitimately excluded under Section 280A(g), but you need to handle the 1099 so the notice never generates.

The standard approach is to report the rental income on Schedule E and then enter an offsetting amount on the same form with a notation referencing the Section 280A(g) exclusion, so the net taxable rental income is zero. That satisfies the matching system while preserving the exclusion. If you land in this situation, working with a tax professional is worth the cost. An improperly handled 1099 can trigger follow-up correspondence that drags on for months.

Records to Keep

The Augusta Rule itself asks for no form, no schedule, no disclosure. That simplicity cuts both ways: your only defense in an audit is what you kept yourself. Contemporaneous records are the entire case.

At a minimum, keep:

A calendar or log of the exact days the property was rented, confirming the total stayed at 14 or fewer.
A log of the days you personally used the property, showing you met the personal-use test.
A signed rental agreement covering the dates, parties, property address, and payment amount.
Evidence of fair market value: screenshots or printouts of comparable listings from the same time period and area, or a formal appraisal for larger rentals.
Payment records showing the money actually moved, such as bank statements, cancelled checks, or transfer confirmations that match the agreement.

For rentals from your own business, add the meeting agendas, attendance records, and minutes. The IRS has no specific form for verifying Augusta Rule compliance, which means your file has to speak for itself.

State and Local Taxes Still Apply

Section 280A(g) is a federal income tax provision. It does not shield you from state or local taxes on short-term rentals. Many jurisdictions impose occupancy or lodging taxes on any rental shorter than 30 days, with combined state, county, and city rates running from under 1 percent to over 20 percent. Some localities also require a short-term rental permit or registration even for a handful of rental days per year.

Whether your city or county enforces these obligations against someone renting 14 days or fewer varies. Some exempt very low-volume rentals; others don’t. Before the first booking, check with your local tax authority or municipal code to find out whether you need to register, collect occupancy taxes, or both. Federal tax-free treatment is small comfort if you owe local lodging tax penalties.

1
Office of the Law Revision Counsel. 26 USC 280A – Disallowance of Certain Expenses in Connection With Business Use of Home, Rental of Vacation Homes, Etc.
2
Internal Revenue Service. About Schedule E (Form 1040), Supplemental Income and Loss
3
Internal Revenue Service. Publication 527 (2025), Residential Rental Property
4
Legal Information Institute. 26 USC 280A(f)(1) – Dwelling Unit Defined
5
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
6
Internal Revenue Service. Publication 1099 General Instructions for Certain Information Returns (2026)