Score a Tax Win Like Rory: Leveraging the ‘Augusta Rule’ Under § 280A(g)

The 14-Day Hole-In-One

Section 280A(g) of the Internal Revenue Code—affectionately dubbed the “Augusta Rule” because of the lucrative home rentals that bloom around the Masters Tournament—lets individual homeowners earn up to 14 days of short‑term rental income completely tax‑free. When structured correctly, neither the rental revenue nor related deductions appear on the homeowner’s return. It is one of the rare provisions that simultaneously avoids gross‑income inclusion and sidesteps information‑return filing.

How it Works

From Amen Corner to the Tax Code: A Brief History

• Early 1960s – 1970s: As the Masters gained prestige, Augusta residents discovered a sideline—renting their homes to players, sponsors, and patrons for tournament week.
• Local Lobbying: Georgia lawmakers, keen to protect this seasonal cottage industry, pressed Congress for a narrow exclusion so that casual, short‑term rentals wouldn’t create unexpected tax bills for their constituents.
• Tax Reform Act of 1976: Congress enacted § 280A. Subsection (g) carved out the now‑famous 14‑day exclusion, informally nicknamed the “Augusta Rule.”
• Post‑Enactment Boom: By the 1980s, home‑rental agencies in Augusta were brokering thousands of short‑term leases each April, cementing the rule’s link to the tournament.
• Modern Expansion: The same structure now benefits homeowners near the U.S. Open, Formula 1 races, major music festivals, and corporate retreats—anywhere brief, high‑demand events spike lodging prices.

Why Corporations Care

Many privately held companies (and even public boards) use the Augusta Rule to host off‑site strategy sessions, director retreats, or client entertainment at a shareholder’s or executive’s home:

1. Corporation deducts the rent as an ordinary and necessary business expense under § 162.
2. Homeowner excludes the income under § 280A(g).
3. Cash moves from corporation to owner without payroll taxes, dividend treatment, or a Schedule E trail—provided the arrangement is properly papered.

Common Hazards in the Rough

• Over‑par pricing: Inflated “rent” invites IRS re‑characterization as disguised compensation or a constructive dividend.
• Excessive use: Accidentally booking the 15th rental day ruins the exclusion for the entire year.
• Thin documentation: Minutes, agendas, and attendee lists should substantiate a bona fide business purpose; avoid resort‑style invoices that look like perks.
• Related‑party traps: C‑corps must beware of § 482 (transfer‑pricing) adjustments; S‑corps and partnerships must still respect shareholder/partner benefit rules.

Playbook for 2025 Events

Executives with homes near high‑demand venues—or picturesque ranches outside Austin—should evaluate whether a short corporate lease could offset personal expenses or fund charitable‑giving goals.

Action Steps

1. Set the “par rate.” Obtain a written rental‑value analysis.
2. Paper the lease. Use a short‑form agreement specifying dates, purpose, rent, and amenities.
3. Document business use. Keep board resolutions, agendas, and attendee sign‑in sheets.
4. Count your days. Maintain a rental log to ensure you stay at or under 14.
5. Coordinate with payroll and finance. Confirm the rent payment is coded to “facility rental,” not “compensation.”

Bottom Line

With careful structuring, the Augusta Rule can turn a two‑week home rental into a tax‑free birdie for owners and a deductible expense for their companies. As with any aggressive swing, success hinges on disciplined form and solid record‑keeping. Reach out to your Scale LLP contact to ensure your next retreat—or watch party—is on course.

This alert provides general information and does not constitute legal or tax advice. Consult your advisors before acting on any strategy described herein.