The Augusta Rule, named after Augusta National Golf Club, allows you to deduct property rental expenses without reporting the rental income under IRC 280A(g). If you rent your property for 14 or fewer days annually at fair market rent, you don't report the income, yet you still deduct expenses allocable to that period.
How the Augusta Rule Works
The rule has two components: (1) If you rent a property for 14 days or fewer, you don't report the rental income. (2) You can still deduct rental expenses (depreciation, utilities, maintenance, insurance) allocable to the rental period, even though you're not reporting income.
Practical Example
A business owner owns a lake house. Under the Augusta Rule, they rent it for only 14 days annually (a corporate retreat for their business) at fair market rent ($5,000 per day, or $70,000 total). They report $0 in rental income but deduct the full rental period's share of property taxes, utilities, insurance, maintenance, and depreciation. If those expenses total $15,000 for the 14-day period, they've created a $15,000 deduction with zero income.
Fair Market Rent Requirement
This is critical: The rent must be at fair market value. You can't rent a lake house at $100 per day when similar properties rent for $5,000 per day. The IRS scrutinizes fair market rent, so compare against comparable properties renting in your area during that time.
The 14-Day Threshold
The rule applies only if you rent 14 days or fewer. If you rent 15 days, the rule no longer applies, and you must report all rental income and deduct all rental expenses under normal rules. The step from 14 days (no income reporting) to 15 days (full income reporting) is significant. Many owners structure rentals specifically to stay at or below 14 days.
Common Uses
Corporate retreats (business owner rents vacation home to their business), client entertainment (business rents property for client dinners), executive gatherings (team rents property for annual planning meetings), facility rental (business rents access to a facility for short periods).
The Strategy
Business owners with valuable properties can leverage the Augusta Rule to deduct property expenses without reporting income. If you own investment real estate, a vacation home, or a business facility that could be rented, consider using the 14-day rental strategy.
Documentation
The IRS will scrutinize this strategy in an audit, so documentation is essential: Rental agreements showing fair market terms, payment records showing rent was collected, comparable rental rates from similar properties, records of specific dates rented (no more than 14 days annually).
The Caveats
The Augusta Rule is fully legal, but the IRS is skeptical of aggressive applications. Don't attempt to claim personal use as business rental. Don't underreport the number of days rented. Don't set rental rates far below fair market value.
Should You Use the Augusta Rule?
If you own property that could be rented at fair market rates, and you have business reasons to rent it short-term, the Augusta Rule is worth considering. For business owners with vacation homes, investment property, or corporate facilities, it can create $10,000-50,000+ in annual deductions.