Augusta Rule Calculator (Section 280A(g))

Section 280A(g) is two sentences of the code doing something unusual. If a dwelling unit used as a residence is rented for fewer than 15 days in the year, the rental income is excluded from gross income entirely, and no deductions attributable to that rental are allowed.

It was written for homeowners near events who let their houses for a week — the Masters at Augusta being the example that gave the provision its nickname. It was never drafted as a business-owner strategy. But the statute does not care who the tenant is, so when the tenant is your own corporation the result is a deduction on the business return with no corresponding income on the personal one.

That asymmetry is the entire benefit, and it is genuine. It is also the reason the arrangement attracts attention: very few provisions in the code produce a deduction without matching income, and one that arises from a transaction with yourself invites the question of whether the transaction was real.

This is not a threshold where the excess becomes taxable. It is a cliff. Rent for fourteen days and the entire amount is excluded; rent for fifteen and the entire amount is taxable, the property falls under the vacation-home rules of section 280A, and you are into allocating expenses between personal and rental use.

The fourteen days are counted across the whole tax year and across all rental use of the home, not per tenant or per business. A week let to holidaymakers in summer consumes half the allowance before any board meeting is held.

There is no partial-day arithmetic to be clever with here, and no carryover from an unused year. The safe practice among people who use this seriously is to stop at twelve, leaving room for a miscount.

Three failures account for almost every adjustment on audit, and all three are about evidence rather than the law.

The first is the rate. It must be what an unrelated party would pay for comparable space, supported by written quotes obtained at the time. A $3,000 daily rate for a suburban dining room is the single most common reason these deductions are reduced, and the reduction usually comes with a penalty.

The second is the business purpose. The meeting has to be real: an agenda, minutes, attendees, a reason the space was needed. A recurring monthly "board meeting" of a single-shareholder S corporation with no minutes is not a rental, it is a distribution with a label on it.

The third is the mechanics. There must be a written rental agreement, and the business must actually pay from its own account. Where the business is an S corporation the payment is reported on Form 1099-MISC to the shareholder, who then reports it and backs it out under the exclusion — skipping that step is what turns a defensible deduction into an unreported-income problem.

A final trap worth naming: because the income is excluded, no expenses of the rental may be deducted against it, and the rent paid cannot also be claimed as a home office deduction for the same space. Attempting both is double-dipping and will not survive review.