Section 280A(g) of the tax code is one of the most underused provisions for business owners in Tennessee and across the country. The provision is called the Augusta Rule because it originated to help homeowners near Augusta National rent their houses to Masters Tournament attendees without paying federal income tax on the proceeds. Congress kept the rule simple. If you rent your personal residence for 14 days or fewer in a calendar year, that rental income is not reportable on your personal return. The business pays fair market rent, deducts it as an ordinary business expense, and the homeowner receives the money tax-free. For business owners who own their home, this is a legitimate way to move money out of the business and into personal hands without triggering payroll tax, self-employment tax, or income tax.
The math works because the IRS does not consider rental income for periods of 14 days or fewer to be taxable. The agency does not require you to report it. They do not issue a 1099 for it. The homeowner reports nothing. The business deducts what it paid. The deduction reduces the business owner's taxable profit dollar for dollar. A small business owner who pays themselves $1,200 per day for board meetings held at their home, ten times a year, has shifted $12,000 from the business to their personal account with zero federal income tax owed. At a 32 percent marginal rate plus 15.3 percent self-employment, that is roughly $5,700 in tax savings per year.
There are real rules. The home has to be your personal residence, not a rental or business property. The rent has to be reasonable, meaning what a third party would actually pay to rent your space for the same kind of event. Most CPAs recommend documenting three to five comparable venues in your area. Conference rooms at hotels, event spaces, and short-term meeting venues in Nashville are running between $400 and $2,500 per day depending on size and amenities. The business needs a legitimate reason to be at the home. Board meetings, strategy sessions, client dinners, team retreats, and offsite training are all defensible. Birthday parties are not.
The documentation matters more than the rate. The IRS audits Augusta Rule deductions and the deductions that fail are almost always the ones with thin paperwork. You need a written lease between the business and the homeowner for each event. You need an agenda, attendance list, and notes from the meeting. You need a copy of the comparable rate research. You need a check or transfer from the business account to the personal account, not cash. CPAs who specialize in this area recommend a separate file for each event. The cost of preparing the documentation is roughly an hour of administrative time per event.
The rule has limits worth understanding. It applies to personal residences only. It does not apply to vacation rentals you also use personally. It caps at 14 days total across the entire calendar year, so an event-heavy business cannot lean on this provision for more than two weeks of activity. The deduction has to be ordinary and necessary for the business, which means a one-person consulting firm renting their home to themselves for $2,500 a day for board meetings the owner attends alone will get challenged. Multiple participants help. Real outcomes from the meetings help more. Single-member LLCs taxed as disregarded entities cannot use this rule because there is no separate entity to pay the rent.
The reason most CPAs never bring this up is liability and effort. A CPA who advises a client poorly on Augusta Rule documentation could end up defending the deduction in an audit. The fee for preparing the documentation correctly often exceeds what general practice CPAs are willing to bill. Specialized tax strategists who work with small business owners full-time are typically the ones who set this up. The cost of a properly documented program for a small business is usually between $800 and $2,400 in professional fees for the year. The tax savings on $14,000 of legitimate rental income at top marginal rates often exceed $5,000.
For business owners in Nashville who own their home and run an S-corp or partnership, the Augusta Rule is worth a conversation with a tax professional who has actually documented these arrangements. The starting point is a calendar review of how many in-person meetings, retreats, or client events you held last year at your home. If the answer is four or more, the rule probably saves you real money. If you are already holding these events and just have not been billing your business for the space, you are leaving the deduction on the table. The IRS will not tell you to take it. Your software will not flag it. The provision sits in the code waiting for owners who know to use it.
