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The Overview
The Augusta Rule lets you rent your home to your own S-Corp for up to 14 days per year and receive that rental income tax free under Section 280A of the Internal Revenue Code.
At the right daily rate, it can move taxable income off your personal return while your S-Corp deducts the same amount as a business expense.
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Most physicians never use it. Not because the rule is obscure, but because most generalist preparers do not walk physician clients through the structure, documentation, and fair market value work it requires. This guide does.
In This Guide
The Basics
What the Augusta Rule Actually Is
The Augusta Rule gets its name from Augusta, Georgia, where homeowners rented their homes during the Masters golf tournament. Section 280A(g) of the Internal Revenue Code lets any homeowner rent a personal residence for up to 14 days per calendar year and exclude that rental income from gross income entirely.
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For a physician who owns an S-Corp, the rule becomes a planning item with a clean structure. When your S-Corp is the tenant and the rental serves a real business purpose, three things happen at once:
1
The S-Corp deducts the rent as an ordinary business expense on Form 1120-S.
2
You receive the rent personally and exclude it from your individual return.
3
Your overall taxable income drops by the full rental amount.
This is the only common place in the tax code where the same dollar produces a business deduction for one party and tax free receipt for the other.
Step by Step
How It Works for Physicians With an S-Corp
The Augusta Rule is mechanically straightforward. Every step matters, and the order matters.
01
Confirm the structure.
You own your primary or secondary residence and you own (or are a beneficial owner of) an S-Corp, a PLLC taxed as an S-Corp, or a partnership with a real need for offsite meeting space.
02
Identify a legitimate business purpose.
Board meetings, annual planning sessions, hiring interviews, business retreats, continuing education for your team. The use must be one your business would otherwise hold elsewhere. Essentially, rather than paying for a hotel conference room or event space, your business is going to rent space from you personally.
03
Determine fair market rental value.
Pull comparable daily rates from at least three independent sources before signing the lease. Keep in mind that if your business is renting a place to conduct a legitimate meeting, then the fair market rent should generally reflect the market for comparable meeting facilities, not the market for renting an entire luxury residence.
04
Sign a written rental agreement
Before the rental day. Include lease term, dates, daily rate, payment terms, and business purpose.
05
Hold the meeting and conduct real business.
Agenda in advance. Sign in attendees. Take minutes that capture decisions made.
06
Pay and record the deduction.
ACH or business check from the entity to your personal account, recorded as rent expense on Form 1120-S. Never cash.
07
Stay under 15 days.
The Section 280A(g) exclusion applies only when the rental period is fewer than 15 days. Day 15 disqualifies the entire benefit.
Determining FMV after the fact, signing a lease retroactively, or paying yourself before the meeting are the patterns that lose the deduction.
Eligibility
Who Qualifies
Eligibility comes down to three things: a separate business entity as tenant, ownership of the home, and a real business reason to use it.
Physicians who can use it:
Practice owners with the practice taxed as an S-Corp or partnership.
1099 physicians with an LLC or PLLC that has elected S-Corp tax treatment.
W-2 physicians who run a separate business taxed as an S-Corp
Dual physician households where each spouse owns a separate S-Corp.
Physicians who cannot use it:
W-2 only physicians with no business entity. There is no second party to rent from.
Sole proprietors. The IRS treats the proprietor and the business as the same taxpayer.
Physicians who do not own the home being rented.
Forming an S-Corp solely to take advantage of the Augusta Rule is rarely worth the compliance cost. The rule works best when the S-Corp already exists for the FICA savings reasons covered in our physician S-Corp election guide, layered on top.
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Once the structure is in place, the next question is what the rule actually moves on your return.
The Numbers
Real Numbers: What the Augusta Rule Looks Like in Practice
The benefit depends on the daily fair market rental value of your home and your marginal federal and state rate.
Example: Mid-Sized Home, Mid-Cost Market
Daily FMV: $500 (i.e., what this would cost to rent a comparable space, such as a conference room).
14 days rented: $7,000 received personally, excluded from income
S-Corp deducts $7,000 from pass-through income
Marginal rate (federal 32% plus state 5%): 37%
Figures are illustrative. Daily rates depend on what a comparable business space would rent for.
Real World Application
An emergency medicine physician with a consulting S-Corp holds four quarterly planning sessions at her home. She pulls comps showing comparable executive meeting venues at $750 per day, signs a lease before each session, distributes an agenda, and keeps minutes. Four days at $750 adds $3,000 in S-Corp deductions, all of which she receives personally and excludes from income. A practice owner running monthly board meetings up to the 14 day cap would scale into the $10,500 range or higher.
Defensible Rates
How to Determine Fair Market Rental Value
The most common reason Augusta Rule deductions are challenged is unsupported daily rates.
The Three Source Standard
Pull comparable daily rates from at least three independent sources before signing the lease:
1
Short term residential rentals in your area: Airbnb and VRBO listings of comparable square footage, bedroom count, and amenities (if it would be ordinary, necessary, and reasonable for the business to otherwise be renting an Airbnb/VRBO for this event).
2
Hotel and conference space that would host an equivalent meeting: full day room rental at a comparable hotel, including catering or AV charges.
3
Event venue or executive suite rates for the same number of attendees and meeting type.
Take screenshots with the date visible and save the URLs. Match for capacity and feature set, not just neighborhood: a six bedroom home hosting an eight person planning session is more comparable to a hotel boardroom than to a one bedroom Airbnb.
What Not to Do
Do not use your own past rate as the only justification.
Do not average a high outlier with two reasonable comps to inflate the rate.
Do not adopt a flat round number without underlying support.
Six Records
Documentation the IRS Expects to See
The Augusta Rule is well settled law. What gets challenged in audit is whether the rental actually happened and whether the rate was defensible. Six records make the difference.
Meeting agenda
Distributed in advance; specific topics, time blocks, decisions to be made
Helps business purpose
Confirms the rent moved
Payment record
ACH receipt or business check stub; bank statements showing the transfer
Attendee sign in
Names, roles, signatures, date
Confirms participants
Helps establish the meeting occurred
Meeting minutes
Contemporaneous; decisions, action items, attendees
Written rental agreement
Establishes the transaction
Signed before each rental period; lease term, dates, daily rate, business purpose
Purpose
Record
Format
Helps defend the rate
FMV substantiation
Three independent comparable listings with dates and screenshots
Retain these records for seven years and store them with your S-Corp books. Clean bookkeeping captures them at the time of the meeting and ties each one to the rent expense entry.
Strong documentation defends the deduction. Weak documentation loses it.
Six Records
Documentation the IRS Expects to See
The Augusta Rule is well settled law. What gets challenged in audit is whether the rental actually happened and whether the rate was defensible. Six records make the difference.
Meeting agenda
Distributed in advance; specific topics, time blocks, decisions to be made
Helps business purpose
Confirms the rent moved
Payment record
ACH receipt or business check stub; bank statements showing the transfer
Attendee sign in
Names, roles, signatures, date
Confirms participants
Written rental agreement
Establishes the transaction
Signed before each rental period; lease term, dates, daily rate, business purpose
Purpose
Record
Format
Helps defend the rate
FMV substantiation
Three independent comparable listings with dates and screenshots
Retain these records for seven years and store them with your S-Corp books. Clean bookkeeping captures them at the time of the meeting and ties each one to the rent expense entry.
Strong documentation defends the deduction. Weak documentation loses it.
Written rental agreement
Purpose
Establishes the transaction
Format
Signed before each rental period; lease term, dates, daily rate, business purpose
FMV substantiation
Purpose
Helps defend the rate
Format
Three independent comparable listings with dates and screenshots
Meeting agenda
Purpose
Helps business purpose
Format
Distributed in advance; specific topics, time blocks, decisions to be made
Meeting minutes
Purpose
Helps establish the meeting occurred
Format
Distributed in advance; specific topics, time blocks, decisions to be made
Attendee sign in
Purpose
Confirms participants
Format
Names, roles, signatures, date
Payment record
Purpose
Confirms the rent moved
Format
ACH receipt or business check stub; bank statements showing the transfer
Six Records
Documentation the IRS Expects to See
The Augusta Rule is well settled law. What gets challenged in audit is whether the rental actually happened and whether the rate was defensible. Six records make the difference.
Meeting agenda
Distributed in advance; specific topics, time blocks, decisions to be made
Helps business purpose
Confirms the rent moved
Payment record
ACH receipt or business check stub; bank statements showing the transfer
Attendee sign in
Names, roles, signatures, date
Confirms participants
Helps establish the meeting occurred
Meeting minutes
Contemporaneous; decisions, action items, attendees
Written rental agreement
Establishes the transaction
Signed before each rental period; lease term, dates, daily rate, business purpose
Purpose
Record
Format
Helps defend the rate
FMV substantiation
Three independent comparable listings with dates and screenshots
Retain these records for seven years and store them with your S-Corp books. Clean bookkeeping captures them at the time of the meeting and ties each one to the rent expense entry.
Strong documentation defends the deduction. Weak documentation loses it.
What to Avoid
Common Mistakes That Trigger Audits
These are the patterns that draw scrutiny.
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Rental days on holidays or family events.
Renting on Thanksgiving or a birthday weekend suggests the meeting is a pretext for a family gathering.
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A daily rate above defensible FMV.
A $5,000 rate on a home that would rent for $800 on Airbnb invites a rate adjustment that wipes out most of the benefit and adds penalties.
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No real business activity.
A board meeting with one attendee, no agenda, and no minutes is not a meeting. The IRS can recharacterize the payment as a disguised distribution.
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Cash payments or vague transfers.
Rent must move through traceable channels: ACH or check, S-Corp to personal, recorded as rent expense.
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Backdated agreements or minutes.
Documents created after the rental day, with metadata that proves it, lose the deduction.
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Crossing 14 days.
Day 15 eliminates the Section 280A(g) exclusion entirely.
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Inconsistent treatment between returns.
The 1120-S deducts the rent, but the personal return reports the same amount as Schedule E income because the preparer was unaware of the Section 280A(g) exclusion. Preventable when the same tax team handles both returns.
Every one of these is correctable when the engagement is set up before the rentals happen.
Integration
How the Augusta Rule Fits With Your Other Tax Planning
The Augusta Rule is one item in an integrated physician tax planning year, not a planning item used in isolation. It pairs with:
The S-Corp election itself, the prerequisite for most physicians using this rule. See our physician S-Corp election guide.
The PTET election, which can reduce state tax on the same S-Corp income. See our PTET guide for physicians.
The full inventory of physician deductions, including home office, mileage, and continuing education. See our physician tax deductions guide.
Clean entity formation and bookkeeping. The deduction is only as good as the records behind it. See physician entity formation and our physician specific tax team services.
Augusta Rule appears most often in plans for 1099 physicians and physician practice owners with established S-Corp structures. Doc Wealth's tax team builds the plan around the largest items first and layers Augusta Rule in where documentation supports it.
Answers
Frequently Asked Questions
Have a question that's not here? Your discovery call is the right place to ask. 30 minutes, no obligation.
01
Can I use the Augusta Rule as a W-2 employed physician with no side business?
01
Can I use the Augusta Rule as a W-2 employed physician with no side business?
Technically any individual can take advantage of the Augusta Rule by renting their residence out for less than 15 days during the year and excluding the rental income. For example, if there's a big event going on in your city/town, you can list your property on Airbnb and if the total rental days are less than 15 days during the year, then you do not have to report that income. That is the Augusta Rule most simply.
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However, without a separate business entity, a W-2 only physician cannot utilize the Augusta Rule to take a tax deduction, since there is no business to pay rent. So while you're free to rent your home out to an unrelated party (and exclude the income), without a separate business entity, there is no way to rent your home to your business and take a deduction at the business level for the rent paid. If you run a side business taxed as an S-Corp, that entity could potentially rent your home even when your primary income is W-2.
02
Do I have to be an S-Corp specifically, or can a partnership or LLC work?
02
Do I have to be an S-Corp specifically, or can a partnership or LLC work?
Any business entity that is a separate taxpayer from you personally and has a genuine business need for offsite meeting space can serve as the Augusta Rule renter, including S-Corps, partnerships, and multi-member LLCs. Single-member LLCs without an S-Corp or C-Corp election are disregarded entities and create the same problem as a sole proprietorship.
03
What is a defensible daily rate for a physician home under the Augusta Rule?
03
What is a defensible daily rate for a physician home under the Augusta Rule?
A defensible Augusta Rule daily rate is what your specific home would rent for to an unrelated third party for a comparable business meeting, supported by at least three independent comparable listings documented at the time you set the rate. Daily rates we see typically range from $500 to $2,000 depending on home size, market, purposes, and meeting capacity.
04
Can I rent my home to my S-Corp for a team holiday party?
04
Can I rent my home to my S-Corp for a team holiday party?
A team holiday party can qualify for the Augusta Rule if it has a real business purpose, such as year end planning, recognition, or bonus discussion, and is documented like any other business meeting with an agenda, attendee list, and minutes. It does not qualify if it is a personal family gathering with a business label added on.
05
Does the Augusta Rule work in every state?
05
Does the Augusta Rule work in every state?
The federal Augusta Rule under Section 280A(g) applies in every state, but state income tax treatment varies because some states do not conform fully to Section 280A or apply different rules to S-Corp owners renting their personal residence to themselves. Your tax team should confirm state treatment as part of any annual planning review before relying on the rule.
06
How long do I need to keep Augusta Rule records?
06
How long do I need to keep Augusta Rule records?
Retain all Augusta Rule documentation for at least seven years after the tax return is filed, which covers the IRS extended look-back period for substantial understatement and gives you a defensible position if the deduction is examined later. Store records with your S-Corp books, not personal files, and tie each rental day to the corresponding rent expense entry.
Resources
Keep Reading
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Thousands of physicians work with Doc Wealth for year round tax planning, run by an elite team of Tax Attorneys, CPAs, and Enrolled Agents. The Augusta Rule is one item we layer into the annual plan when documentation supports it.
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This material is intended for educational and informational purposes only and does not constitute tax, legal, accounting, or financial advice. The content is general in nature and may not apply to your specific circumstances. Tax laws and financial regulations are subject to change and interpretation, and the application of these laws can vary based on individual situations. Before making any decisions, you should consult with a qualified tax advisor, legal counsel, or financial professional.