The Augusta Rule in 2026: §280A(g), the 14-day cliff, and what audit-defensible documentation looks like

The Augusta Rule is the popular name for the rental-income exclusion in Internal Revenue Code Section 280A(g). The provision allows a taxpayer who rents their personal residence for fewer than 15 days during the tax year to exclude the rental income from gross income entirely, while also losing the deduction for any directly related rental expenses for those days. It is the rare provision in the Code where income simply does not exist for federal tax purposes if the day count stays under the threshold. The broader rental rules are documented in IRS Publication 527, Residential Rental Property, and the dwelling-unit-personal-use rules in §280A more generally.

The name “Augusta Rule” comes from the practical use case during the Masters Tournament in Augusta, Georgia, where local homeowners rent their houses for one week to corporate clients at very high nightly rates and the homeowner pockets the rent tax-free because the rental day count stays well under 15. The same rule is available anywhere in the United States, not just Augusta.

1. Dwelling unit used as a residence: The property must be a dwelling unit that the taxpayer used as a residence during the year. Under §280A(d)(1), a dwelling unit is used as a residence if the taxpayer used it for personal purposes for the greater of 14 days or 10 percent of the total days it was rented at fair rental.
2. Fewer than 15 rental days: The dwelling unit must not have been rented at fair rental for 15 or more days during the tax year. Day 15 of rental destroys the entire exclusion, retroactively to day 1.
3. Fair rental rate: The rent must be at a reasonable market rate. Renting to a related party or to your own business at a discount or at an inflated rate is a common audit issue.
4. Income exclusion, expense forfeiture: The rental income is excluded from gross income, but no deductions are allowed for expenses attributable to those rental days (other than the mortgage interest, real-estate taxes, and casualty losses that would be deductible anyway as itemized deductions on Schedule A).

The most discussed planning use of §280A(g) in 2026 is the small-business owner renting their personal residence to their own business for up to 14 days a year for business meetings, board retreats, or training. The business deducts the rent as an ordinary and necessary business expense under IRC §162; the owner excludes the rent from personal income under §280A(g). Done correctly, this is a real federal tax shift from ordinary income to no income.

Done incorrectly, this is one of the most cited examples in IRS audit literature of an aggressive position that fails on examination. The IRS will look at four things: (1) was there a genuine business reason for the meeting, (2) was the rent at a fair market rate supported by independent comparables, (3) was there a written rental agreement signed before the use, and (4) was the rent actually paid by the business to the owner with documentation. If any of those four legs is weak, the deduction is disallowed and the income may be re-characterized.

The records that defend a §280A(g) position on examination are not exotic but they need to exist before the use, not after.

• Written rental agreement between the owner (in their personal capacity) and the business entity, specifying the dates, the property address, the rental rate, the included services, and the payment terms.
• Independent comparables showing the rental rate is at fair market. Three to five comparables from rental platforms, conference-venue quotes, or similar event-space listings within the local market is the standard approach.
• Meeting agenda and minutes showing the business purpose: who attended, what was discussed, what was decided. Generic “quarterly business meeting” without an agenda is the most common documentation weakness.
• Actual payment from the business’s bank account to the owner’s personal bank account, dated near the rental period, with a corresponding journal entry on the business’s books treating it as rent expense.
• Day-count log showing the rental did not exceed 14 days for the year, plus any other rental use of the same dwelling for any other tenant.

State income-tax conformity to §280A(g) is not uniform. Most states with a state income tax follow the federal treatment because their starting point is federal adjusted gross income or federal taxable income. A handful of states have decoupled from various federal provisions in ways that could affect rental treatment. California specifically follows federal §280A. New York, Massachusetts, Illinois, and most other major states also conform. Confirm with the state revenue department’s instructions for the relevant year.

§280A(g) is a cliff, not a phase-out. Renting for 14 days excludes 100 percent of the rental income. Renting for 15 days means 100 percent of the rental income is taxable and the dwelling unit is treated as a rental property for the full year, with the complicated allocation rules of §280A(c) and §280A(e) kicking in to limit deductions based on personal-use vs rental-use day proportions.

Taxpayers fall off the cliff in three predictable ways. First, by counting only the “business” rental days and forgetting that a few days of vacation-rental to a third party during the summer count toward the same 14-day limit. Second, by treating a multi-night rental as a single “event” without correctly counting each calendar day rented at fair rental. Third, by including periods where the property was made available for rent but not actually rented — §280A(d)(2)(B) and §280A(d)(3) have nuanced rules on what counts as a rental day vs a personal-use day vs a fair-rental-availability day.

Inflated rental rate. Charging the business $1,500 per day for a meeting in a residence where comparable conference venues rent at $300 per day collapses the position on audit. The IRS treats the excess as a non-deductible distribution to the owner.

Missing meeting agenda. A bank-statement showing the rent payment but no agenda, no attendee list, no business purpose, is the weakest defense.

Renting to a single-member LLC owned by the same taxpayer. An SMLLC is a disregarded entity for federal tax. Renting to a disregarded entity is renting to yourself. The rule requires renting to a separate taxpayer (the business, in the case of an S corp, partnership, or C corp; a disregarded entity does not count).

Crossing 15 days inadvertently. Combine business rentals with summer Airbnb activity and the 14-day clock can fill before the taxpayer notices.

• IRC §280A: Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc. — statute including §280A(g) at subsection (g).
• IRS Publication 527: Residential Rental Property — rental-income context.
• IRC §162: Trade or business expenses — the deduction the business takes for the rent.
• Treas. Reg. §301.7701-3 — entity classification rules, relevant to SMLLC disregarded-entity treatment.
• IRS Form 1099-MISC instructions — rent reporting at $600+.