In April 2025, homeowners in Augusta, Georgia, collectively earned approximately $8.5 million during Masters week by renting out their properties, a notable 11% increase from the previous year. This surge in rental income revenue is primarily attributed to the Augusta Rule.
With large-scale events like the Super Bowl, political conventions, and the 2028 Olympics approaching, more homeowners are eyeing this specific IRS tax rule.
However, most don’t understand the qualifications or how to structure it legally. So, this guide will explain how the Augusta Rule works, its key requirements and examples, and how to use it correctly to ensure profits.
What Is the Augusta Rule?
The Augusta Rule comes from Section 280A(g) of the Internal Revenue Code. It allows you to rent out your primary residence within a specific period in a calendar year without paying federal income tax on that rental income, as long as you meet the criteria.
While this tax exemption is widely used in Augusta, it is available to anyone in the U.S.
Read More: Types of Real Estate Ownership: Meaning, Kinds, & the Right One
How the Augusta Rule Works
Under the Augusta Rule, you can rent your primary residence or a qualifying dwelling for up to 14 days each year without reporting the income on your federal tax return. This includes homes, loft apartments, studios or 1-bed units, duplexes, condos, and, in some cases, detached guest units.
At the same time, the IRS doesn’t allow deductions for rental-related costs like cleaning, maintenance, or marketing if the income qualifies for the exemption.
Augusta Rule Taxes Key Requirements
To qualify for the Augusta Rule, you must meet the following IRS conditions:
Dwelling Unit
A dwelling unit includes any property used as a residence that offers sleeping, cooking, and toilet facilities. For instance, your vacation property investment with a bed, kitchenette, and full bathroom qualifies. However, if that structure lacks one of those features, say, a bathroom, it wouldn’t meet the standard.
Rental Duration
The tax exclusion only applies if the property is rented for 14 days or less during the calendar year. Renting out the property for even one extra day disqualifies all rental income from the exemption.
For example, if you rent your home during a tech conference for 10 days and again during a festival for four more, you’re within the limit. A single additional day invalidates the exemption.
No Deductions
Since you won’t report your income on your tax return, you cannot claim tax write-offs tied to the rental. These costs include cleaning, utilities, and even depreciation. If you paid for a landscaping crew to prepare your backyard for a rented wedding event, you cannot write that expense off.
Tax Exclusion
If you meet all the criteria, your rental income is excluded from your gross and net income for tax purposes. As a result, there are no earning limits.
You can charge market rates, even if they’re significantly above normal, due to a high-demand event. For instance, earning $12,000 during a major tournament is entirely legal and exempt, as long as the use was documented correctly and stayed within the 14-day limit.
You May Also Like: Lease Fee vs. Leasehold: What’s the Difference?
Where to Apply the Augusta Rule
The following examples show how individuals and companies legally apply the rule in different settings.
Renting for Local Events
Homeowners often lease their properties during concerts, sports events, or festivals when hotels or hostels fill quickly and short-term demand spikes. These rentals are usually brief but can command above-average rates, making them well-suited for the 14-day window allowed under the Augusta Rule.
For instance, an Austin homeowner may rent out their house for seven nights during SXSW at $800 per night without owing taxes on the $5,600 earned.
Film/TV Productions
Production companies regularly rent residential spaces for single-day or multi-day shoots, particularly for commercials, interviews, or short features. These rentals are often limited in scope and duration, which aligns with the Augusta Rule’s 14-day cap.
Let’s say you sublease or sublet your living room to a production crew for one day at $2,500. With the Augusta Rule, you can keep that income tax-free if the use stays within the time limit.
Family Gatherings
A property owner can legally rent their home to family for events like weddings, holidays, or reunions, provided the rental is legitimate. This means documenting a rental agreement and collecting payment at fair market value.
Suppose you host relatives for a five-night stay during a wedding in your Airbnb house and charge $400 per night. With proper documentation, the $2,000 income qualifies for exclusion.
Seasonal Rentals
Some properties attract short-term interest during specific seasons, such as ski weeks, summer break, or regional holidays. One example is renting out a mountain cabin for Thanksgiving and again for New Year’s weekend. As long as total rental days don’t exceed the limit, the earnings remain exempt.
Read More: Tenants by Severalty: Is It the Right Choice for You?
How Can Business Owners Benefit From the Augusta Rule?
Business owners can also legally use the Augusta Rule, but the application works differently than with personal rentals. When structured correctly, it allows you to rent your home for the following purposes.
Rent Your Home to Your Own Business
One practical use of the Augusta Rule for business owners involves renting their personal residence to their own company. This setup is permitted under IRS rules if the rental is for a valid business purpose.
Examples include:
Company Retreats
A business owner can rent their personal residence to their company for short-term retreats, as long as the purpose is tied to planning, training, or other legitimate business functions. You must document the agenda, participants, and nature of the work done during the stay.
For example, if the leadership team uses a lake house for a three-day strategy session in Q3, and the business pays fair market rent, that income can qualify under the Augusta Rule while remaining tax-exempt for the homeowner.
Meetings
Holding meetings at a residence also qualifies when they serve a business function. This includes staff check-ins, investor briefings, or client reviews. Each meeting should have a clear purpose, a written agenda, and attendance records.
For instance, hosting a one-day planning meeting with investors at your home, and having your company pay for the space, allows you to treat the rental income as exempt if it doesn’t exceed the 14-day limit.
Training Sessions or Workshops
A business can rent a home to host internal training or external workshops. You must document the session, and the space must reasonably support the activity.
A relevant example would be using your home to hold a one-day compliance training for your team. You’ll charge a fair rental rate and document the session’s agenda and attendees to support the deduction on the business side and the exemption on your personal return.
Document Fair Market Rental Value
To comply with the Augusta Rule, the rent you charge must reflect the going rate for similar properties or venues in your area. To justify the amount, you must use third-party sources, such as quotes from local event spaces, rental platform listings, or written appraisals.
For example, if you plan to rent your home to your business for $750 per day, obtain quotes from three local hotel conference rooms offering comparable amenities to back that rate.
Create a Legitimate Rental Agreement
A written agreement between you and your business should clearly state the lease or rental terms. Include the dates, purpose, daily rate, and responsibilities of each party. The contract must exist before the event takes place and should be retained in both your business and personal records.
If your LLC organization plans a two-day strategy session at your home, you should sign a lease that covers those two dates and file it with your tax documents.
Pay Yourself from the Business Account
Payment must be traceable and made from the business’s official account to your personal account. This confirms that the transaction occurred and wasn’t informal or fabricated.
Avoid using cash or writing it off without proof. For example, after hosting a board meeting, initiate a $2,000 automated cleaning house (ACH) transfer from your S-Corp’s operating account directly into your personal account, and note the payment details in your business ledger.
You May Also Like: Market Value of a Property: How to Determine, Factors, and Importance
Common Mistakes to Avoid When Using the Augusta Rule
Using the Augusta Rule without following IRS guidelines can lead to disqualification or penalties. This section outlines the following errors that frequently trigger audits or reduce eligibility.
Going Over the 14-Day Limit and Losing Augusta Rule Eligibility
Renting your property for more than 14 days in a calendar year disqualifies all rental income from exclusion under the Augusta Rule. Once you exceed the limits, the IRS requires the entire amount to be reported as taxable income, even if only one extra day pushes you over. To avoid this, document every rental date and cross-reference with your calendar or accounting software to ensure compliance.
Mixing Income Types
Combining Augusta Rule rentals with income from platforms like Airbnb or separate long-term tenants can create reporting errors. The IRS treats each rental type differently, so merging them can lead to inconsistencies or incorrect filings.
Therefore, you must keep distinct records by using separate contracts, payment methods, and accounting entries for Augusta Rule rentals.
Not Reporting the Income
Although the income is exempt from taxes, failing to maintain records can affect eligibility. The IRS doesn’t require you to list the income on your return, but they expect documentation to support your claim if questioned. To stay compliant, store signed agreements, proof of fair market value, and payment receipts in your tax file each year to protect against audits.
Misusing the Augusta Rule for Non-Business Purposes
Using the Augusta Rule for personal events labeled as business use can result in penalties. To qualify, the rental must serve a real business function, such as planning sessions, client meetings, or training, with supporting materials.
To ensure clarity in your business purpose, prepare and save agendas, attendance lists, or event summaries to confirm the event’s objective if requested by the IRS.
Read More: Types of Real Estate Ownership: Meaning, Kinds, & the Right One
Final Thoughts
Planning for the Augusta Rule starts with checking how your documentation, payments, and timing align with IRS rules. When you understand the qualifications, you can structure rentals that meet the standard and keep more of your income tax-free.
For clearer, more practical, and expert insights on using the Augusta Rule and other tax policies correctly, subscribe to Financial Daily Update today.
