The 14-Day Rental Rule: Tax-Free Rent and the Augusta Rule

By Tom, CPA · Updated October 27, 2026

Part of: Rental Property Taxes

TL;DR: If you rent a home you also use as a residence for fewer than 15 days in a year, you do not report the rent and you do not deduct rental expenses. Some business owners have their corporation or partnership rent their home for meetings, the so-called Augusta Rule. That only works with a real business purpose, fair market rent and documentation, and the Tax Court has cut deductions that lacked them.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Your tenant pays the mortgage; the IRS pays for the roof over 27.5 years. But for 14 days a year, the IRS does not want to hear about it at all. Rent your home for a golf tournament, a football weekend or a film shoot, and section 280A(g) says the rent is not income.

Pub. 527 describes the rule: if you use a dwelling unit as a home and rent it fewer than 15 days during the year, do not report any of the rental income and do not deduct any expenses as rental expenses. It is nicknamed the "Augusta Rule" or "Masters Rule" after homeowners near Augusta National who rent their houses during the Masters. Then promoters discovered that a business owner's company could be the renter. That version needs much more care, and the Tax Court case law shows why.

CPA Warning Label: The Augusta Rule is a real exclusion wrapped in a lot of internet hype. The exclusion is for you; the deduction is for your business, and the business still has to prove the meeting happened and the rent was fair.

The 14-day exclusion

Requirements:

• The property is a dwelling unit you use as a residence during the year (generally, personal use of more than the greater of 14 days or 10% of fair rental days). A primary home or vacation home can qualify.
• You rent it for fewer than 15 days during the year. Fourteen days is the maximum; day 15 makes all the rent reportable.

Consequences:

• Rental income is excluded, regardless of amount.
• No rental expenses are deducted. You still deduct qualified mortgage interest, real estate taxes and casualty losses as you otherwise would on Schedule A, if you itemize (Pub. 527).
• No Schedule E reporting for the rental.

Illustration: A family rents their house for 6 nights during a major tournament for $18,000 total. Under the 14-day rule, they report nothing on their federal return, and they cannot deduct the extra cleaning or a share of utilities. If they had rented for 16 nights, all the rent would be reportable on Schedule E under the vacation home rules, with expenses allocated and limited. See vacation home rental rules.

Payment platforms or renters may issue information returns; if so, keep records showing why the income is excluded.

Business renting your home

The planning version: an owner of an S corporation, C corporation or partnership has the business rent the owner's home for legitimate business uses, such as board meetings, planning sessions or company events, for up to 14 days a year. The business deducts the rent under section 162 as an ordinary and necessary business expense, and the owner excludes it under section 280A(g).

Points that get lost:

• Section 280A(g) does not create the deduction. It only excludes the owner's income. The business's deduction must stand on its own as ordinary, necessary and reasonable in amount.
• Sole proprietors and single-member LLCs taxed as disregarded entities cannot meaningfully pay rent to themselves; there is no separate payer.
• Real meetings. The meeting must actually occur, with a business purpose, at the home, on the days rented.
• Fair rent. The amount must reflect what an unrelated party would pay for similar space for a similar use.
• Home office overlap. Space used regularly and exclusively as a home office is treated differently; this exclusion is about short-term rental of the dwelling.

Fair rent evidence

Fair rental value is where most cases are won or lost. Evidence that helps:

• Written quotes from comparable local venues (hotel meeting rooms, event spaces, coworking conference rooms) for the same headcount, duration and amenities, gathered at the time.
• Comparable short-term rental listings for whole-home event use, if that is the use.
• A written rental agreement between the business and the owner for each use, stating date, hours, purpose and rent.
• Invoices from the owner to the business and payment from the business account.
• Meeting agendas, attendee lists, minutes or notes, and photos.

Rent based on the full daily price of a luxury home for a two-hour meeting of two people is not a fair comparison. Rent for meeting space, scaled to the meeting, is.

Abuse cases

In Sinopoli v. Commissioner, T.C. Memo. 2023-105, an S corporation owned by three individuals paid them rent for business meetings at their homes and deducted it, while the owners relied on section 280A(g) to exclude the rent. The Tax Court found no credible evidence of what business was conducted at the meetings, noted that the owners did not obtain an appraisal of rental value, and rejected their rent computation. It allowed rent of $6,000 for one year, figured as 12 meetings at $500, and disallowed the rest of the rent at issue. The court emphasized that section 280A(g) addresses the recipient's income; the corporation still had to show the rent was ordinary, necessary and reasonable.

Lessons:

• Documentation of each meeting is essential.
• Rent must be supported by comparable rates for the actual use.
• Paying a fixed monthly amount regardless of use looks like disguised compensation or a distribution.
• Related-party payments get extra scrutiny.
• Penalties can apply when deductions are disallowed.

Ignoring those lessons is how a real exclusion becomes an audit adjustment. Promotions that suggest a business can pay "up to 14 days at any rate" misstate the rule.

A conservative setup

1. Confirm the entity is separate from you (S corporation, C corporation or partnership) and that a meeting at your home serves a real business need that the entity would otherwise meet elsewhere.
2. Before the year starts, gather two or three written quotes for comparable meeting space for the expected group size and length.
3. Sign a short rental agreement for each use, stating the date, hours, rooms used, attendees and rent.
4. Hold the meeting, keep the agenda, minutes and attendee list, and photograph the setup.
5. Invoice the business and have it pay from its own account, recording rent expense in its books.
6. Count days per dwelling unit and stop at 14 for the year across all renters, including any outside renters.
7. Have your preparer review the arrangement, since the entity's return, not yours, carries the deduction risk.

Frugal Fran's version produces a few modest, well-documented rent payments a year. Lavish Larry's version is "$5,000 a day because the house is nice," which is precisely the pattern the Tax Court has rejected.

State treatment

States that start their income tax computation from federal adjusted gross income generally inherit the federal exclusion automatically, because the rent never enters federal income. States with their own definitions of income, or that decouple from specific federal provisions, may differ. The business's deduction similarly flows through to state returns for most pass-through entities. Separately, local short-term rental rules, permits and occupancy taxes can apply even to a few nights of rental; see STR occupancy taxes. Check your state's instructions and local rules before relying on the federal treatment.

Common questions about counting days

• Days count by rental use: a night rented counts as a day rented.
• The rule applies per dwelling unit. Two homes are tested separately.
• Days rented to a family member at less than fair rent are personal use days, not rental days, under the vacation home rules.
• Days rented to your own business at fair rent count as rental days for the 14-day limit.
• If rentals reach 15 days, the vacation home allocation rules apply to the whole year's rent, not just the excess days.

For an overview of related rules, see the Augusta Rule quick guide and the rental property tax guide.