Augusta Rule for S-Corp Owners
How to rent your personal residence to your S-Corporation under IRC §280A(g) for maximum tax savings
The Augusta Rule allows you to rent your personal residence to your S-Corporation for up to 14 days per year.
Your S-Corp
Deducts Rental Payment
Reduces taxable income on Form 1120-S
You (Homeowner)
Receives Tax-Free Income
No reporting on Form 1040 under §280A(g)
Example Calculation:
14 days × $500/day FMV = $7,000 rental income
• S-Corp: $7,000 deduction → saves $2,100–$2,800 in taxes (30–40% rate)
• You: $7,000 tax-free income (not reported on 1040)
• Net Package Cost: $497
Net Benefit: $1,600–$2,300+ in tax savings
Why the Augusta Rule is Powerful for S-Corps
Your S-Corp deducts the rental payment (reduces taxable income), while you receive tax-free rental income personally (IRC §280A(g)).
The rental payment reduces your S-Corp's net income, lowering your self-employment tax obligation.
Move income from S-Corp (taxed at your bracket) to personal rental income (tax-free under Augusta Rule).
Valid S-Corporation Status
Your business must have filed Form 2553 and received IRS approval as an S-Corporation.
You Own the Property Personally
The residential property must be owned by you individually, not by the S-Corp. Augusta Rule applies to personal residences, not corporate-owned property.
Legitimate Business Purpose
Meetings must serve actual business objectives: board meetings, strategic planning, client presentations, team retreats, etc.
Written Rental Agreement
Formal contract between you (homeowner) and your S-Corp specifying dates, rate, and terms.
Board Resolution Authorization
S-Corp board must authorize the rental arrangement before meetings occur.
Fair Market Value Rate
Rental rate must be supported by comparable market properties. Inflated rates will be challenged.
Actual Payment from S-Corp
S-Corp must pay you via business check or ACH. No personal funds or constructive payments.
Stay Within 14-Day Limit
Cannot exceed 14 days per calendar year. Day 15 triggers full rental income taxation.
❌ Using personal funds to pay rental invoice
Audit Consequence: IRS will view this as a sham transaction with no legitimate rental arrangement
✓ How to Fix: Always pay from S-Corp business account to personal/homeowner account
❌ No board resolution authorizing rental
Audit Consequence: Suggests informal arrangement; fails corporate formality test
✓ How to Fix: Hold board meeting, pass resolution, and document in corporate minutes
❌ Claiming deduction but never reporting rental income
Audit Consequence: Mismatch triggers audit; shows lack of understanding of tax code
✓ How to Fix: Remember: rental income is tax-free under §280A(g), so you don't report it—but S-Corp still deducts it
❌ Mixing business and personal use on same days
Audit Consequence: IRS may disallow deduction if meetings aren't exclusively business-focused
✓ How to Fix: Keep meetings strictly business; no family gatherings on rental days
❌ Setting rental rate without FMV support
Audit Consequence: Audit will reduce rate to IRS-determined FMV or disallow entirely
✓ How to Fix: Document comparable properties with sources before setting rate
❌ Exceeding 14-day limit
Audit Consequence: Lose tax-free treatment; all rental income becomes taxable on Schedule E
✓ How to Fix: Track meeting dates carefully; stop at 14 days per year
- 1
Verify S-Corp Status
Confirm your business has valid S-Corp election with IRS (Form 2553 approved)
- 2
Plan Business Meetings
Schedule legitimate business meetings with clear objectives (board meetings, strategic planning, etc.)
- 3
Calculate FMV Rate
Research comparable meeting spaces and document fair market rental rate
- 4
Draft Rental Agreement
Create written contract between you (homeowner) and S-Corp
- 5
Pass Board Resolution
Hold S-Corp board meeting and authorize rental arrangement
- 6
Hold Meetings with Documentation
Create agendas, take minutes, and maintain sign-in sheets for each meeting
- 7
Invoice and Pay
Issue invoice from you to S-Corp; S-Corp pays via business check/ACH
- 8
Record Transactions
S-Corp: deduct on Form 1120-S as "Rent" expense. You: no reporting on 1040 (tax-free under §280A(g))
Joe Gallegos, CPA, CVA
Joe Gallegos is a Certified Public Accountant (CPA) and Certified Valuation Analyst (CVA). His professional career in public accounting began in 2012 with one of the Big 4 international accounting firms.
Since 2012, Joe has focused on business tax planning, cash flow management, business valuations, and small business financial consulting.
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Can my S-Corp own the property and still use the Augusta Rule?
No. The Augusta Rule (IRC §280A(g)) only applies to personal residences, not corporate-owned property. The property must be owned by you individually, and rented to your S-Corp for business meetings.
Does this work for single-member S-Corps?
Yes. Even if you're the sole shareholder, officer, and director, the Augusta Rule applies. The key is maintaining corporate formality—written agreements, board resolutions, actual payment from S-Corp funds, and legitimate business meetings.
How do I report this on my S-Corp tax return?
Your S-Corp deducts the rental payment as "Rent" expense on Form 1120-S, Line 11. This reduces taxable income that flows through to your K-1. You do NOT report the rental income on your personal 1040 because it's tax-free under §280A(g).
Can I use this strategy with my spouse's S-Corp?
Yes, if your spouse's S-Corp rents your jointly-owned property for legitimate business meetings. The same requirements apply—proper documentation, FMV rate, actual payment, 14-day limit.
What if my S-Corp has multiple shareholders?
The Augusta Rule works with multi-shareholder S-Corps. The S-Corp rents your property (not other shareholders' properties unless they also implement this strategy for their homes). Board resolution must approve the rental arrangement.
Is this considered a related-party transaction?
Yes, which is why documentation is critical. The IRS scrutinizes related-party transactions heavily. You must prove the rental rate is at fair market value, meetings have legitimate business purpose, and the arrangement is arms-length.
Augusta Rule Result Samples
These examples reflect sample Augusta Rule outcomes based on documented implementations prepared through Augusta Rule IQ. See additional Augusta Rule result samples. Client identities are removed for privacy.
Construction Company
$16,800
Augusta Rule Value
14 documented meeting days
Fair market rental value documentation prepared
Logistics Business
$16,128
Augusta Rule Value
14 documented meeting days
Rental valuation analysis completed
Real Estate Company
$14,784
Augusta Rule Value
14 documented meeting days
Meeting documentation included
Mortgage Business
$13,440
Augusta Rule Value
14 documented meeting days
Fair market rental analysis completed
9
Sample Implementations
$50,400
Max
$16,448
Average
$7,488
Min
These samples reflect Augusta Rule implementations involving businesses renting their residence to their business for up to 14 meeting days per year, consistent with IRC Section 280A(g).
These examples represent sample Augusta Rule outcomes based on documented implementations. Results vary depending on property characteristics, business facts, and proper documentation. Learn how the Augusta Rule works. Augusta Rule strategies must comply with IRS rules.