“I can write off my house because I use it for business, and there is the secret rule I heard about on TikTok.”
Nope. You cannot. First, there are no secret rules. Just terrible interpretations that get you in tax trouble.
Second, the Augusta rule is very specific. Those of you who use it correctly can have some tax-free income. Those who abuse it wind up getting audited and paying back the alleged savings plus penalties and interest.
What is the Augusta Rule?
The Augusta Rule is Section 280A(g) of the Internal Revenue Code. It started with people near the PGA Championship at the Augusta National Golf Club. Lots of people attend the tournament, and there are never enough hotel rooms.
Residents who lived nearby the tournament started staying with relatives in another town, renting out their house during the championship, and making bank. They petitioned the IRS that it is not rental income and won. That is how tax law is made.
The Augusts Rule says that you can rent out your personal residence for less than 15 days per year and it is not income. Nothing taxable here. It’s basically taking on a roommate for a week or two.
Who can use the Augusta Rule?
If you live somewhere that is popular and fun (like the beach or a festival), this rule may work for you. Another scenario is if you live near a stadium and you rent parking spots in your yard a few days a year, the Augusta rule can work for you.
You do not have to be the homeowner. If you rent a great apartment and sublet it for a festival, the Augusta rule applies. As long as it is your home for part of the year, it applies.
However, it cannot be involved in your business or rented for profit. The property must be rented out for less than 15 days all year (NOT 14 days of free rent on a rental) and you cannot take any small business use / home office deductions on that property at all. §280A(g)(1)
Another overlooked issue with the Augusta Rule is that you can’t take any deductions. You are already paying zero tax on it. If you don’t report the income, you can’t deduct any expenses against it. Zero is zero.
Good Rules Become Secrets and Scams
Of course, people think up scams and sell some mega-secret so they can look smart and take your money.
One scheme is encouraging you to rent out your house to your business for 14 days, pay exorbitant rent, and call it tax free income. Basically, your business can deduct the rent but you personally get tax free income.
Don’t fall for this. You cannot self-deal and make up arbitrary numbers to pay yourself. “But this guy on TikTok said…” is not a defense. You will lose in an audit. However, stick with me, it can be done legally.
Can my Business Rent my House for 14 days?
It is highly unlikely. Unless you have an LLC with good records, proof of payment, a rental agreement, a separate place of business, a study of fair market value, and a reason why you had to use your house instead of your primary place of business, you will lose in an audit.
Do not take risks like this with your money. Do not pursue bad advice and chase flimsy tax deductions that are on the audit hot list. There are far better ways to save on taxes. Just ask me!
Check out my Augusta Rule – Audit Proof Worksheet if you want to rent your house to your business legally.