The Augusta Rule: A Tax Strategy Worth Its Hassle?

Written by Mitchell Baldridge, CPA, CFP®

What if you could legally pay yourself or your family thousands of dollars through your business—without paying a dime in taxes on it?

As small business owners, we're constantly searching for legitimate tax strategies to keep more of what we earn. One such strategy that often flies under the radar is the Augusta Rule—but is it worth implementing? Let's dive into this tax provision and analyze it through the lens of what I call the "Return on Hassle" framework.

In this post, we’ll cover exactly how the Augusta Rule works, how much real business owners save with it, and how to make sure you do it right—so the IRS stays happy and your wallet gets heavier.

What Is the Augusta Rule (Section 280A(g))?

Named after homeowners in Augusta, Georgia who rent their homes during the Masters Golf Tournament, the Augusta Rule (Internal Revenue Code Section 280A(g)) allows homeowners to rent their personal residence for up to 14 days each year without reporting the income on their personal tax return. This tax provision is also commonly referred to as the "14-day rule" or "Masters exemption."

For business owners, this creates an interesting opportunity: your business can rent your personal home for legitimate business meetings or events, deduct the rental cost as a business expense, while you receive that rental income tax-free.

Sounds perfect, right? But before you start booking your dining room for board meetings, let's look deeper at both the implementation requirements and whether it's truly worth your time.

How the Augusta Rule Works for Business Owners

Here's the basic structure:

1. Your business rents your personal residence for legitimate business purposes

2. Your business deducts the rental expense (reducing taxable business income)

3. You personally receive rental income that's completely tax-free (up to 14 days)

For example, if your business pays you $1,000 per day to use your home for meetings, you could potentially create up to $14,000 in tax-free income while generating an equivalent business tax deduction. This creates a double tax benefit that few other strategies can match.

Augusta Rule Implementation Requirements for IRS Compliance

To withstand IRS scrutiny, you need to ensure:

• You have proper documentation of fair market rental value for similar properties

• A formal rental agreement exists between you and your business

• The business use is legitimate and documented (agenda, minutes, photos)

• You limit the rental to 14 days maximum per year

• The home isn't your primary place of business

• You maintain separate personal and business banking accounts

The IRS specifically looks for documentation supporting the business purpose and fair market value of these arrangements, so thorough record-keeping is essential for audit protection.

Case Study: How My Client Used the Augusta Rule for Her Design Business And Saved $5K on Taxes

Let me share a real-world example that illustrates both the benefits and implementation process of the Augusta Rule.

Sarah, who runs a marketing agency, hosted her annual team meetings at her home—and saved $5,943 in taxes by doing so. Let’s see how she did it.

Sarah has an annual revenue of approximately $850,000. Her business is structured as an S-Corp, and she personally falls into the 32% federal tax bracket with an additional 5% state tax.

The Challenge

Sarah hosted quarterly team planning sessions, monthly client presentations, and semi-annual training workshops. Previously, she would rent hotel conference rooms for these events at a cost of $800–$1,200 per day, totaling about $12,000 annually.

Her spacious home with a dedicated entertaining area and separate office space was actually better suited for these meetings than most hotel rooms, but she never considered using it for business purposes.

Step-by-Step Augusta Rule Implementation

After learning about the Augusta Rule, Sarah took the following steps:

1. Research Fair Market Value: She gathered data from three local venues (including hotels and event spaces) to establish a fair market rate of $950 per day for a comparable meeting space.

2. Create a Formal Rental Agreement: Sarah drafted a detailed rental agreement between herself and her S-Corp specifying the rental rate, payment terms, and facilities included (meeting space, kitchen access, wifi, etc.).

3. Document Business Purpose: For each rental day, Sarah maintained:

   • Meeting agendas

   • Attendee lists

   • Photos of the business activities

   • Notes or minutes from meetings

   • Calendar invites showing the business purpose

4. Schedule Strategically: She planned 14 business events throughout the year:

   • 4 quarterly planning sessions (4 days)

   • 6 client presentation days (6 days)

   • 2 two-day training workshops (4 days)

5. Separate Transactions: Sarah's business paid her personally via check from the business account to her personal account for each rental, with each payment clearly labeled “Home Rental for Business Meeting.”

The Return on Hassle Framework

Throughout my career advising thousands of wealthy business owners, I've observed that successful people evaluate opportunities not just on Return on Investment (ROI) but equally on what I call Return on Hassle (ROH).

Return on Hassle is defined as: The amount of money you will save or earn divided by the time, money, and brain damage it takes to get there.

As your net worth and tax burden grow, you can dedicate more resources to maximizing tax savings. But for those with limited time and resources, focusing on strategies with the highest ROH is crucial.

Sarah’s Results: An Extra $5,943 In Her Bank Account(s)

Let’s look at Sarah’s use of the Augusta Rule through this framework:

Total Financial Benefit

Direct Income: $13,300 in tax-free rental income (normally she'd pay taxes on this income)

Tax Savings:

• Business tax deduction savings (37% of $13,300): $4,921

• Self-employment tax savings on this amount: $1,022

• Total tax savings: $5,943

Had Sarah taken this $13,300 as a bonus or additional salary instead, she would have received only about $7,357 after taxes. The Augusta Rule allowed her to keep the full amount while still benefiting her business through tax deductions.

Additionally, Sarah was able to host meetings in a more comfortable, private setting that better showcased her design expertise to clients, providing an intangible business benefit beyond the financial advantages.

The Hassle Factor

Sarah estimated she spent about 8 hours total throughout the year on documentation and implementation:

• 3 hours researching comparable rates and creating the rental agreement

• 5 hours throughout the year documenting meetings and handling the payment process

With a total extra cash benefit of $5,943 for 8 hours of work, Sarah’s “Return on Hassle” was approximately $743 per hour of effort—an exceptional return that made the strategy well worth implementing for her situation.

Is It Worth It?

For many business owners, particularly those with higher incomes and appropriate business needs, the Augusta Rule presents a compelling ROH. The tax savings can be substantial relative to the effort required.

However, if your business is in its early stages or your income is more modest, your time might be better spent on activities that directly grow your business rather than implementing complex tax strategies.

As I often tell clients:

"You should have the simplest plan that can save you the most, and only add complexity if the savings are worth it."

Who Should Consider the Augusta Rule?

This strategy works best for:

• Business owners with established, profitable businesses

• Those with homes suitable for business meetings or events

• Taxpayers in higher tax brackets where the savings are more significant

• People with the organizational capacity to maintain proper documentation

• Businesses with legitimate needs for off-site meetings or events

Beyond the Augusta Rule: Building a Comprehensive Tax Strategy

While the Augusta Rule can be valuable, it's just one component of a comprehensive tax strategy. The most effective approach follows three mechanisms:

1. AVOID: Legally avoiding taxes through exclusions in the tax code

2. DEFER: Pushing tax obligations further into the future

3. MINIMIZE: Reducing your lifetime effective tax rate through strategic planning

Your tax strategy should be tailored to your specific situation, focusing on the highest Return on Hassle opportunities first before adding complexity.

Frequently Asked Questions About the Augusta Rule

Can I use the Augusta Rule if I work from home? Yes, but with important caveats. Your home office cannot be your primary place of business. The Augusta Rule can still apply to other parts of your home used for meetings or events.

What types of business activities qualify? Legitimate activities include board meetings, staff training, team building events, client presentations, strategy sessions, and annual planning meetings. Regular operational work or personal events don’t qualify.

Do I need to charge market rate? Yes. The IRS requires a fair market value comparable to similar homes or venues. Charging above-market rates can trigger scrutiny. Use sites like Convene, Regus, and Peerspace for comps.

Can I exceed 14 days of rental? No. The tax-free benefit is capped at 14 days per year. Any rental beyond that becomes fully taxable income.

Does this work for all business structures? It works for sole proprietors, partnerships, LLCs, and S-Corps. C-Corps may need additional planning due to related-party rules.

How do I prove fair market rental value? Get quotes from comparable hotels, conference centers, or event venues. You can also use Airbnb or VRBO if you’re renting out more of your home for larger events.

🧾 Pro Tip: Track All Expenses with Shoeboxed

Implementing the Augusta Rule is a great tax move—but only if your documentation is airtight. That’s where Shoeboxed comes in!

Shoeboxed makes it easy to:

• Snap and store digital receipts from catering, decor, and supplies

• Mail in paper receipts using the Magic Envelope—Shoeboxed scans them for you

• Track mileage to and from meetings automatically

Everything is categorized and export-ready—so when tax time comes, you’re ready to back up your Augusta Rule deduction. Did you know the IRS recommends saving your receipts and documents for 3 years? Make storing your receipts and tax docs a breeze, try Shoeboxed for free.

💸 Ready to Save Money on Taxes With The Augusta Rule?

Ready to implement the Augusta Rule for your business? Schedule a free tax strategy call with the experts at Better Bookkeeping and see how much extra cash you can keep out of the tax man’s hands.

About Better Bookkeeping

Huge thanks to Better Bookkeeping for this post! Shoeboxed is a client, and couldn't be happier. Better Bookkeeping helps founders and solopreneurs implement tax-saving strategies while handling your:

• Weekly bookkeeping & transaction classifications

• Monthly financial reports

• Quarterly tax planning

• Year-end business and personal tax filing

• Ongoing tax strategy optimization

You didn’t start a business to do your own books. Let the Better Bookkepping team handle the numbers—so you can focus on growing your business.

Learn more at BetterBookkeeping.com.

Mitchell Baldridge is a CPA and CFP® who has advised hundreds of successful entrepreneurs. His Return on Hassle framework has been featured in Sahil Bloom’s book “5 Types of Wealth.”