The one-pager you asked for
The Augusta Rule: who it actually works for, and who gets nothing
IRC §280A(g) · 2026 · Payam Farzan, CPA
Rent a home you live in to your business for fewer than 15 days a year and you don't report that rent as income. Real rule, in the code since 1976, and California conforms. But the benefit exists only because two different taxpayers sit on either side of it: you exclude the income, your business deducts the rent. Same taxpayer on both sides means nothing to deduct and nothing to exclude — which is the part that gets left out of most posts about this.
1 · Which entities keep it, which get nothing
| Your structure | Benefit? | Why |
|---|---|---|
| Sole proprietor (Schedule C) | NO | Same taxpayer. No separate party to pay the rent, so no deduction is created. |
| Single-member LLC, disregarded | NO | “Disregarded” means exactly that for income tax — same taxpayer, same result. |
| Single-member LLC, S-corp election | YES | The election creates a separate taxpayer that can deduct the rent it pays you. |
| S-corporation | YES | The corporation deducts the rent; you exclude it under §280A(g). |
| C-corporation | YES | Same mechanism, with wider related-party and reasonableness scrutiny. |
| Multi-member LLC / partnership | YES | Separate entity, separate return, deducts the rent it pays you. |
| Rental property only, no business | NO | No trade or business to hold the meeting or pay the rent. Owning property isn't the payer. |
In a “NO” row, the fix isn't paperwork — it's the structure, and that's a much bigger conversation than 14 days of rent. Don't paper a rental agreement with yourself and hope.
2 · Day 15 wipes out the whole year
Fewer than 15 days, or the exclusion is gone entirely: the rent becomes reportable and the property drops into the normal rental framework. No partial credit, and no unwinding it in December. Count every rental day for the year, across all payers.
3 · The three-quote rate test
An inflated rate is the most common way this gets disallowed, and the Tax Court has already trimmed aggressive versions.
- Find real comps. Hotel meeting rooms, coworking conference rooms and event spaces at similar capacity. In Los Angeles, use Los Angeles comps.
- Get three written quotes for the duration and headcount you'll actually use. Emails or dated screenshots both work.
- Set your rate at or below the median. Not the highest.
- Save them dated, the same week you set the rate, and re-quote annually. Contemporaneous beats reconstructed.
4 · The 1099 step most people miss
Rent of $2,000 or more paid by a business to a non-corporate landlord goes on Form 1099-MISC, Box 1. That threshold rose from $600 for payments after December 31, 2025.
The trap. The 1099 tells IRS matching systems to expect rental income on your Schedule E. §280A(g) means it won't be there, and the mismatch generates an automated notice. Legitimate strategy, automatic letter.
The fix. Report it, then back it out with an offsetting entry identified as §280A(g). Tell your preparer before January.
5 · What has to be in the file
- Written rental agreement, signed and dated before the rental.
- A real business purpose — a meeting that actually happened.
- Agenda and minutes, with attendees listed.
- Three dated comparable quotes; rate at or below the median.
- Day log: 14 or fewer rental days for the year, all payers combined.
- An actual payment from the business account to your personal account. A journal entry is not a payment.
- Form 1099-MISC if rent hits $2,000, and the Schedule E offset coordinated.
Where this stops being a checklist. Whether an S-corp election makes sense for you depends on your profit, your payroll, your state and what else you own. If you're in a “NO” row above and the Augusta Rule is the reason you're considering an election, that's the wrong reason to do it. Let's look at the whole picture instead.
General information only, current as of September 2026 — not tax advice for your situation. Receiving this does not create a CPA-client relationship. Whether §280A(g) produces any benefit for you depends on your entity type and elections, the business purpose of the rental, the rate you set, your documentation, your state, and facts specific to you that are not known to us. Nothing here guarantees any outcome, or how any tax authority will treat your position. Tax law and dollar thresholds change — confirm current figures, and consult your own CPA before entering a rental agreement with a business you own.
Sources. IRC §280A(g); IRS Pub. 527, Residential Rental Property. Separate-entity requirement and treatment of sole proprietors / disregarded single-member LLCs: Adams and Reese LLP; Molen & Associates; TaxPlanIQ (2026). Rate documentation and audit exposure: Fraim, Cawley & Company CPAs; Uncle Kam (2026). California conformity to the 14-day rule: Corvee. Form 1099-MISC rent reporting and the $600→$2,000 change (OBBB §70433 amending IRC §6041, payments after December 31, 2025): T. Rodier, CPA Practice Advisor, September 1, 2026.