Augusta Rule (Section 280A)

The 14-Day Tax-Free Rental Rule

Section 280A of the Internal Revenue Code contains one of the most overlooked tax provisions for homeowners. If you rent your personal residence for 14 days or fewer per year, the rental income is completely tax-free. Not reduced. Not deferred. Not reported. The IRS does not want to hear about it. You keep every dollar.

How It Works

The rule was originally designed to prevent the IRS from penalizing homeowners who rented their homes during short events. The classic example is Augusta, Georgia during the Masters Tournament. Homeowners near Augusta National rent their houses for $5,000 to $15,000 per week, pocket the income, and owe zero tax. The rule applies everywhere, not just Augusta. Any major event near your home qualifies: the Kentucky Derby in Louisville, the Super Bowl in the host city, large conferences, college football weekends, music festivals. Even renting to your own S-Corp for board meetings can qualify (consult a CPA on this one).

• Rent for 14 days or fewer per year: income is tax-free
• Rent for 15+ days: ALL rental income becomes taxable (not just the excess)
• The 14-day threshold is a cliff, not a phase-out. Day 15 changes everything.
• No deductions allowed against the tax-free income (no depreciation, no expenses)
• You must use the home personally for more than 14 days or 10% of rental days (whichever is greater)

Real Numbers

You live near a major university. Each fall, 4 home football weekends draw visitors who need lodging. You list your house on Airbnb for those 8 nights (Friday and Saturday of each game weekend). You charge $800/night. That is $6,400 in rental income, tax-free. No 1099. No Schedule E. No self-employment tax. If you cross the 14-day line, all of it becomes taxable. At a 32% marginal rate, that same $6,400 would cost you $2,048 in federal tax plus state tax plus self-employment tax on the net. The difference between day 14 and day 15 is thousands of dollars.

Track your rental days carefully. Use a calendar. Keep records of who rented, when, and how much they paid. The IRS rarely audits 280A situations, but if they do, you need documentation proving you stayed under 14 days. Also consider the S-Corp board meeting strategy: if you own an S-Corp, your company can rent your home for legitimate business meetings at fair market rates, and the rental income to you is tax-free while the rent is a deductible business expense for the corp. Both sides win.

Section 280A lets you earn tax-free rental income from your personal residence for up to 14 days per year. Know the cliff: day 15 makes ALL rental income taxable. Track your days, price aggressively for high-demand events, and keep the full amount.