The 14-Day Loophole: The Augusta Rule (Section 280A)
The 14-Day Loophole: The Augusta Rule (Section 280A)
How to legally shift corporate profits into your personal bank account tax-free by renting your home to your own business for board meetings.
Executive Summary
- The Concept: IRS Section 280A(g) allows you to rent out your personal residence for **up to 14 days per year** without reporting the rental income on your individual tax return. It is 100% tax-free income.
- The Shift: Your S-Corp or Business rents your home for monthly board meetings, strategy sessions, or shareholder retreats.
👉 Business Side: Pays rent (e.g., $2,000/day) ➔ Gets a Tax Deduction.
👉 Personal Side: Receives rent ($28,000/year) ➔ Pays $0 Income Tax. - The Effect: You effectively moved $28,000 from a taxable environment (Business Profit) to a tax-free environment (Personal Cash) without doing any extra work.
Paper Trail is King
IRS Audit Proofing: You cannot just write a check. You must treat this like a real arm’s-length transaction.
1. Comps: Get quotes from local hotels/event centers to prove your daily rate is reasonable (e.g., $1,000 – $3,000).
2. Minutes: Document the meeting agenda and attendees.
3. Invoice: Send a formal invoice from you (Landlord) to your Business (Tenant).
Mechanic: The Tax-Free Transfer
14 Days
Max Duration
Tax Ded
For Business
0% Tax
For You
Market Rate
Reasonable Price
Simulation: Dividend vs. Augusta Rule ($28,000 Distribution)
Net Cash in Pocket
| Feature | Standard Home Office Deduction | Augusta Rule (280A) |
|---|---|---|
| Frequency | Daily Use | Occasional (Max 14 Days) |
| Income Treatment | N/A (Just an expense) | Tax-Free Income to Owner |
| Depreciation | Recapture Tax upon sale | None (No depreciation taken) |
“Don’t meet at a hotel; meet at your dining table. The IRS invites you to hold your shareholder meetings at home, provided you treat yourself as strictly as you would treat the Marriott.”
Essential Resources
INTERNAL
BMT Playbooks
EXTERNAL
Primary Sources