The Augusta Rule Explained — What IRS Section 280A(g) Actually Says and the Requirements Orange County Business Owners Must Meet

Pathfinding Consultants | Business Tax Preparation | Orange County, CA | June 2026

Source: IRC §280A(g) | IRC §280A(a) | IRC §162 | IRC §6001 | IRS Topic No. 415 | IRS Chief Counsel INFO 2006-0012 | Rev. Proc. 2008-16 | IRS Publication 527

The Augusta Rule is a common name for a provision in the Internal Revenue Code, Section 280A(g). It is named after Augusta, Georgia, where homeowners have historically rented their homes during a well-known annual golf tournament. This blog explains what Section 280A actually says, the specific requirements the IRS standard imposes, and why the rule is narrow and easy to apply incorrectly. This is an educational explanation for Orange County business owners — it is not a recommendation to use the Augusta Rule. Whether the rule applies to any specific situation depends on the facts and should be reviewed with a qualified tax advisor near me. Pathfinding Consultants provides business tax preparation Orange County small businesses use. When owners search for tax firms near me, understanding the actual requirements of a rule like Section 280A matters more than the headline. Source: IRC §280A(g); IRS Topic No. 415.

What Section 280A(g) Says

Under IRC §280A(g), if a dwelling unit is used during the year by the taxpayer as a residence and is rented for fewer than 15 days during the tax year, the rental income the taxpayer receives is not included in gross income. In plain terms, the Augusta Rule under Section 280A(g) means a homeowner who rents a residence for 14 days or fewer in a year does not report that rental income. This is the entire substance of the income-exclusion side of the rule. Source: IRC §280A(g); IRS Chief Counsel INFO 2006-0012.

The general rule and the exclusion

IRC §280A(a) generally disallows deductions for expenses related to a dwelling unit used as a residence. Section 280A(g) provides a specific result for short-term rental of that residence: when the residence is rented for fewer than 15 days in the tax year, the rental income is excluded from gross income, and correspondingly no deductions are allowed for expenses related to that rental use. The 14 day home rental threshold is the defining limit of Section 280A(g). Source: IRC §280A(a); IRC §280A(g).

Source: IRC §280A(g); IRS Topic No. 415, Renting Residential and Vacation Property — irs.gov/taxtopics/tc415. The IRS describes this as renting a dwelling used as a home for fewer than 15 days; the rental income is not reported.

The Requirements the IRS Standard Imposes

The Augusta Rule is narrow. The income exclusion under Section 280A(g) applies only when specific conditions are met, and — separately — if a business pays the rent and intends to deduct it, the business deduction must independently satisfy the ordinary-and-necessary standard and substantiation rules. These are distinct requirements. The following table states each requirement and its source:

Requirement	What the IRS Standard Requires	Source
14-day limit	The dwelling is rented for fewer than 15 days during the tax year.	IRC §280A(g)
Used as a residence	The dwelling unit is used by the taxpayer as a residence during the year.	IRC §280A(g)
Fair rental	Whether an amount is a fair rental is based on all facts and circumstances when the rental agreement is entered into.	Rev. Proc. 2008-16
Business deduction standard	If a business pays the rent, the expense must be ordinary and necessary to be deductible by the business.	IRC §162
Records	Records sufficient to substantiate the amount and business purpose must be kept.	IRC §6001; Pub 583

Sources as cited. IRC = Internal Revenue Code. The 14 day home rental limit, the residence requirement, and the fair rental standard are all conditions of Section 280A(g) and related guidance.

Two Separate Tax Questions, Not One

A point frequently misunderstood about the Augusta Rule is that it involves two separate tax questions, each with its own rules. Treating them as one is where errors occur. Source: IRC §280A(g); IRC §162.

Question 1 — Is the rental income excluded for the homeowner?

This is governed by Section 280A(g). If the residence is rented for fewer than 15 days in the year, the rental income is excluded from the homeowner’s gross income. This is the income-exclusion side of the Augusta Rule. Source: IRC §280A(g).

Question 2 — Can a business deduct the rent it paid?

If a business pays rent to use a residence, the business deduction is a separate question governed by IRC §162. To be deductible, the payment must be an ordinary and necessary business expense, the amount must be reasonable (a fair rental), and the business must keep records substantiating the amount and the business purpose under IRC §6001. The income exclusion under Section 280A(g) does not by itself make a business payment deductible. Source: IRC §162; IRC §6001.

⚠  Because these are two separate questions, a payment can be excluded from the homeowner’s income under Section 280A(g) and still be challenged as a business deduction if it is not ordinary, necessary, reasonable in amount, and properly documented. Applying the Augusta Rule without meeting the business deduction requirements can result in a disallowed deduction, additional tax, interest, and penalties. Source: IRC §162; IRC §6001.

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Documentation the IRS Standard Expects

Because the business deduction side of the Augusta Rule depends on substantiation, records matter. IRC §6001 and IRS Publication 583 require records sufficient to establish the amount and business purpose of a deduction. For a business that pays rent to use a residence, documentation generally relevant to meeting the standard includes:

• A written rental agreement stating the dates, the amount, and the purpose of the rental. Source: IRC §6001; Pub 583.

• Support for the fair rental amount — documentation of comparable rental rates for similar space, since fair rental is determined on the facts and circumstances. Source: Rev. Proc. 2008-16.

• Evidence of a genuine business purpose for the use of the residence — because the business deduction must be ordinary and necessary under IRC §162. Source: IRC §162.

• A record of the number of rental days, to confirm the dwelling was rented fewer than 15 days in the year for the Section 280A(g) income exclusion. Source: IRC §280A(g).

• Retention of records until the period of limitations for the return expires. Source: IRS Publication 583.

Source: IRC §6001; IRC §162; Rev. Proc. 2008-16; IRS Publication 583. Documentation requirements are fact-specific; a qualified tax professional can review a specific situation.

Business Tax Preparation at Pathfinding Consultants

Pathfinding Consultants provides business tax preparation Orange County small businesses use. When owners search for tax firms near me, a tax advisor near me, or an enrolled agent near me, Pathfinding Consultants reviews tax rules against the specific facts of the business rather than applying a rule because it is popular:

• Fact-specific review — whether a rule such as Section 280A(g) applies depends on the facts of the business and the residence. Pathfinding Consultants reviews the conditions before any position is taken.

• Documentation review — records that substantiate the amount and business purpose under IRC §6001 and IRS Publication 583, consistent with the ordinary-and-necessary standard of IRC §162.

• Business tax preparation — returns prepared with positions supported by documentation, not by headline strategies.

• Representation by an enrolled agent near me — Pathfinding Consultants is staffed by an enrolled agent, a tax professional authorized to represent taxpayers before the IRS.

• Pathfinding Consultants — business tax preparation Orange County. (949) 620-1036 | calendly.com/tax-pathfindingconsultants/30min

Get an honest review of how a tax rule applies to you

Pathfinding Consultants provides business tax preparation Orange County small businesses use, reviewing each rule against the facts.

Schedule your consultation now.

Call: (949) 620-1036  ·  pathfindingconsultants.com

Key Takeaways

• The Augusta Rule is the common name for IRC §280A(g). Source: IRC §280A(g).

• Under Section 280A(g), if a residence is rented for fewer than 15 days in the tax year, the rental income is excluded from the homeowner’s gross income. Source: IRC §280A(g); IRS Topic 415.

• The 14 day home rental limit is the defining condition. If the dwelling is rented 15 days or more, the exclusion does not apply. Source: IRC §280A(g).

• The income exclusion and a business rent deduction are two separate questions. A business deduction must independently be ordinary and necessary under IRC §162. Source: IRC §162.

• Fair rental is determined on all facts and circumstances. Source: Rev. Proc. 2008-16.

• Records sufficient to substantiate the amount and business purpose must be kept. Source: IRC §6001; IRS Publication 583.

• Applying the rule incorrectly can result in a disallowed deduction, additional tax, interest, and penalties. Whether it applies depends on the facts.

• Pathfinding Consultants provides business tax preparation Orange County small businesses use, reviewing each rule against the specific facts.

• Source: IRC §280A(g) | IRC §280A(a) | IRC §162 | IRC §6001 | IRS Topic 415 | Rev. Proc. 2008-16 | IRS Publication 527 | IRS Publication 583

• Internal: /tax-preparation-services | /tax-planning | /bookkeeping-services

• Call (949) 620-1036 | calendly.com/tax-pathfindingconsultants/30min

IRS DISCLAIMER:

This blog is for general informational purposes only and does not constitute tax or legal advice. Tax laws are complex and subject to change. The rules described have strict requirements, and applying them incorrectly can result in disallowed deductions, additional tax, interest, and penalties. Every situation is different. Please consult a qualified tax professional before making any tax decisions. For official IRS guidance visit irs.gov.