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Taxes

Augusta Rule Tax: What You Need to Know

By
Alexander Harmsen
Alexander Harmsen is the Co-founder and CEO of PortfolioPilot. With a track record of building AI-driven products that have scaled globally, he brings deep expertise in finance, technology, and strategy to create content that is both data-driven and actionable.
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Augusta Rule Tax: What You Need to Know

Have you ever wondered if hosting events at your home could actually save you money on taxes? That’s where the Augusta Rule comes in. Officially known as Section 280A(g) of the Internal Revenue Code, this little-known provision lets homeowners earn tax-free income by renting out their primary residence for up to 14 days a year. Let’s break down how it works, who it’s best for, and how to use it to your advantage.

Key Takeaways

  • The Augusta Rule allows homeowners to rent out their primary residence for up to 14 days annually, tax-free.
  • Originally designed for homeowners in Augusta, Georgia, during the Masters Tournament, it now applies nationwide.
  • To qualify, rentals must meet specific criteria, like charging fair market rates and having written agreements.
  • This tax benefit is especially useful for hosting corporate events or short-term rentals for special occasions.

What Is the Augusta Rule?

The Augusta Rule was created to give homeowners a tax break for short-term rentals. While it got its start helping Augusta, Georgia, residents rent their homes to attendees of the Masters Tournament, it’s a flexible rule that anyone across the U.S. can use.

Key Features:

  1. 14-Day Limit: Income earned from renting your home for up to 14 days a year is completely tax-free.
  2. Primary Residence: Your main home qualifies—this doesn’t apply to investment properties.
  3. Fair Market Rent: The rental rate must reflect what similar properties in your area charge, ensuring it’s not artificially inflated.

How Does It Work?

Taking advantage of the Augusta Rule is easier than you might think. Here’s a simple guide:

  1. Set a Fair Price: Check rental rates for comparable properties in your area. For example, if homes near you rent for $500 per day for similar events, use that as a benchmark.
  2. Write It Down: Whether you’re renting to a business for a corporate retreat or hosting an event, always document the agreement. A written contract is crucial.
  3. Stay Within the Limit: Keep track of the rental days, ensuring they don’t exceed 14 days in a calendar year.
  4. Keep Records: Save contracts, payment receipts, and evidence of fair market rent to stay prepared in case of an IRS review.

Hypothetical Scenario: Imagine Emma, who owns a home near a bustling downtown area. A company rents her property for three corporate retreats, each lasting four days.

  • Total Rental Days: 12 (within the 14-day limit).
  • Rate: $800 per day.
  • Income Earned: $9,600, completely tax-free under the Augusta Rule.

For Emma, this is a fantastic way to earn extra income without increasing her tax bill.

Benefits of the Augusta Rule

  1. Tax-Free Income: Rent your home for up to 14 days and keep all the earnings—no reporting to the IRS.
  2. Versatility: Use it for various purposes, from corporate retreats to weddings or even film shoots.
  3. No Impact on Deductions: This doesn’t interfere with your ability to claim deductions for mortgage interest or property taxes.

Considerations and Pitfalls

While the Augusta Rule is an excellent opportunity, there are a few things to watch out for:

  • Strict Limits: Renting for even one day over the 14-day limit means all rental income becomes taxable.
  • Documentation is Key: Without clear records, you risk losing the tax benefit.
  • Fair Market Value: Overcharging can raise red flags with the IRS, so be diligent in setting your rates.

Who Benefits the Most?

This rule isn’t just for the wealthy—it’s for anyone who owns a home in a high-demand area or has a property suitable for events. Here’s who it helps the most:

  • Homeowners Near Popular Events: Think properties close to festivals, business hubs, or sports tournaments.
  • Entrepreneurs: Perfect for hosting business meetings, retreats, or workshops.
  • People with Large Homes: Great for those who can host gatherings, weddings, or corporate events.

Augusta Rule — FAQs

How many rental days per year does the Augusta Rule allow homeowners to exclude from taxes?
Homeowners can rent out their primary residence for up to 14 days in a calendar year, with all rental income earned during that period excluded from federal income tax.
What happens if a homeowner rents their property for 15 days under the Augusta Rule?
Renting even one day beyond the 14-day threshold makes the entire rental income for that year taxable, eliminating the Augusta Rule’s exemption.
Does the Augusta Rule apply to investment or vacation properties?
No. The provision applies only to a taxpayer’s primary residence. Rentals of second homes or investment properties are not eligible for tax-free treatment under Section 280A(g).
Why is fair market rent critical for Augusta Rule compliance?
The IRS requires that rental rates align with what similar properties in the area would reasonably charge. Overcharging could invalidate the exemption and trigger scrutiny of the rental arrangement.
How was the Augusta Rule originally used in Georgia?
It was introduced to benefit homeowners in Augusta, Georgia, renting to visitors during the Masters Tournament. The rule has since been expanded for use nationwide under the same criteria.
Does income under the Augusta Rule need to be reported on a tax return?
No. When conditions are met—14-day limit, fair market rent, and proper documentation—the income is exempt from reporting on a federal tax return.
Can a homeowner continue claiming mortgage interest and property tax deductions while using the Augusta Rule?
Yes. The exemption does not affect deductions for mortgage interest or property taxes, which remain available under standard tax rules.
What type of documentation is essential for proving Augusta Rule compliance?
Written rental agreements, receipts of payments, and evidence of fair market rates should be kept to substantiate eligibility for the exemption in case of IRS review.
How does the Augusta Rule benefit entrepreneurs hosting corporate events?
Business owners may rent their primary residence to their company for retreats or meetings, provided fair market rent is documented. This allows them to shift up to 14 days of tax-free rental income annually.
What types of events commonly qualify for Augusta Rule rentals?
Typical uses include corporate retreats, weddings, short-term gatherings during festivals, or film shoots. As long as the residence is primary, terms documented, and rent fair, income remains tax-free.

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1: As of February 20, 2025