The Augusta Rule: 14 Days of Tax-Free Rental Income

There is exactly one way to collect rental income the IRS never taxes, never sees on a schedule, and never recaptures later, and it is sitting in Section 280A(g) of the tax code. Rent out your residence for fewer than 15 days in a year and the income does not go on your return at all. Not reduced. Not deferred. Excluded.

That is the Augusta rule, named for Augusta, Georgia, where homeowners have rented to Masters Tournament crowds for one very expensive week a year since long before Airbnb existed. Congress wrote the exemption in 1976 so those homeowners would not have to run their houses as rental businesses for a single week of income, and it has survived, unchanged and uncapped, ever since.

We build bookkeeping software for landlords, so we spend our days on income that very much is taxed. This is the rare corner of rental income where the right answer is: keep it off the books entirely. Here is how it works, where the cliff is, and the business-meeting variant that turns it into a real strategy.

The rule in one sentence

If a dwelling qualifies as your residence and you rent it to others for fewer than 15 days during the year, the rental income is excluded from gross income, and none of the rental expenses are deductible against it.

Three pieces of that sentence do all the work:

• Residence means you personally use the place for more than the greater of 14 days or 10% of the days it is rented at fair value. Your primary home clears this without thinking. A vacation home you genuinely use can clear it. A tenant-occupied rental property cannot.
• Fewer than 15 days means 14 rental days is the maximum. Day 15 does not tax the overage; it detonates the whole exclusion (more below).
• No expense deductions is the trade. You cannot exclude the income and also deduct the cleaning, utilities, or a slice of depreciation for those days. Mortgage interest and property taxes stay right where they were, on your Schedule A itemized deductions, unharmed.

There is no dollar cap. That is what makes the rule interesting instead of cute. Fourteen nights at $150 is $2,100 tax-free; fourteen nights at $2,000 during a Formula 1 weekend or a solar eclipse is $28,000 tax-free. Same rule.

The day-15 cliff

Every other threshold in rental taxation phases in or allocates. This one is a cliff edge.

At 14 rental days: zero taxable income, nothing reported.

At 15 rental days: all the income, back to the first night, becomes reportable under the vacation-home rules of Section 280A. Now you are allocating expenses between personal and rental days, your deductions are capped at the rental income because the home is a residence, and the one-week windfall has become a bookkeeping project. (The general regime is laid out in IRS Publication 527, and Topic 415 covers the residence rules.)

So the count is the whole game. Days you rent to anyone at fair value count. Days it sits empty between guests do not. A "day" is a day of rental use, and 14 one-night stays spend the budget exactly as fast as one 14-night booking. If you host on a platform, reconcile your booking calendar against the count in December, not April, because the difference between 14 and 15 is the difference between $0 and a full vacation-home computation.

One more wrinkle worth knowing: platforms may send a 1099-K for the payouts regardless, because payment processors do not know your day count. A 1099 does not make excluded income taxable, but it does mean your preparer should report the figure and back it out with an explanation, rather than ignore it and invite a matching notice.

Fair market rent, and why documentation is the strategy

Nothing in 280A(g) says the rent must be reasonable, but everything in an audit does. The income is tax-free only if it is actually rent, and rent means what a stranger would pay for that property, on those dates, in that market.

The good news: fair market rent during the exact event you are renting for is often spectacular. The comparable for Masters week is what other Augusta homes rent for during Masters week, not what they rent for on a random Tuesday in February. Document it the way you would want to see it as an auditor:

• Screenshots of comparable listings for the same dates and neighborhood, saved at the time
• A short rental agreement with dates and the rate, even for a platform booking
• Proof of payment landing in your account

Ten minutes of screenshots at booking time is the entire compliance program. Skip it, and years later you are trying to reconstruct what hotel prices looked like during a sold-out weekend.

The business-meeting variant (where this becomes a strategy)

The version that gets tax planners excited has nothing to do with golf: your own business can be the tenant.

If you run an S corporation or a partnership, the entity can rent your home for legitimate business use, a quarterly board meeting, an annual planning retreat, a client dinner, at a fair market day rate, up to 14 days a year. The result is a clean arbitrage: the business deducts the rent as an ordinary expense, and the same dollars arrive to you personally as income the Augusta rule excludes.

Fourteen meetings at a defensible $600 day rate moves $8,400 from the taxed side of your life to the untaxed side, every year. The pieces that make it survive scrutiny:

1. Real meetings. An agenda, notes or minutes, attendees, and a business reason it happened at your home instead of the office. A Tax Court case in 2023 (Sinopoli) slashed exactly this arrangement to a fraction of what was claimed because the meetings and the rates were not credible.
2. A defensible day rate. Comparable meeting-room or event-space rates for your area, not a number reverse-engineered from the deduction you want. Hotel conference rooms and coworking event spaces are the usual comps.
3. Paper. An invoice from you to the company, a rental agreement, payment by check or transfer from the business account. It should look like a transaction between strangers, because that is what you are claiming it is.
4. The right entity. This works for S corps and partnerships. A sole proprietor renting from themselves gets nowhere; Section 280A(c)(6) blocks employees renting to their employer, and you cannot deduct rent paid to yourself on a Schedule C.

Done by the book, it is one of the few strategies that is both simple and genuinely sanctioned by the statute's text. Done lazily, with round numbers, no minutes, and a rate nobody would really pay, it is an easy audit loss.

What the Augusta rule is not

Worth being precise, because the nickname gets stretched:

• It is not for your rental portfolio. A property your tenants occupy is not your residence. The income from your actual rentals lands on Schedule E, where the game is depreciation, expenses, and the paper loss, a different playbook entirely.
• It is not the STR loophole. The short-term rental tax loophole is about material participation making rental losses non-passive. The Augusta rule is about excluding a small amount of income from a home you live in. People blur them because both involve short stays; the mechanics share nothing.
• It does not create deductions. The trade for tax-free income is no rental expense deductions for those days. If your 14 days generated real costs (a cleaning crew, a broken chair), those are personal costs of the arrangement, not write-offs. Small items you buy for the property generally live under the normal rules, where the de minimis safe harbor handles the under-$2,500 stuff on actual rentals.

A worked year

Say you live in a college town with two huge football weekends and a graduation week, and your home would rent for $500 a night on those dates (you saved the comps).

Booking	Nights	Income
Rivalry weekend	3	$1,500
Graduation week	6	$3,000
Homecoming	3	$1,500
Total	12	$6,000

Twelve rental days, under 15. The $6,000 is excluded, reported nowhere, taxed never. Your mortgage interest and property taxes stay fully on Schedule A. If your marginal rate is 32%, the identical income earned as ordinary rent would have kept roughly $1,900 less.

Now the same year with one more 3-night booking: 15 days, and the entire $7,500 becomes reportable under the vacation-home allocation rules. That last $1,500 booking cost you the exclusion on the first $6,000. That is the cliff, and it is why the calendar, not the tax return, is where this rule is won.

The takeaway

The Augusta rule is the tax code at its most generous and most literal: a residence, fewer than 15 rental days, fair market rent, and the income simply does not exist for tax purposes. Count days like they are money, because they are. Save the comps the day you book. If your business rents your home, run it like a real transaction with minutes and invoices. And keep it mentally separate from your actual rental portfolio, where income is very much taxed and the wins come from clean books and every deduction you are owed. Fourteen days is a gift; day fifteen is a bookkeeping assignment.