Your business can pay you rent to use your own home for a work event for up to 14 days a year. It’s entirely tax-free income to you as the homeowner, and your business also gets a tax deduction for the expense. The Augusta Rule isn’t just for business owners. Any homeowner can rent out their homes for up to 14 days out of the year, tax-free. But if you’re a homeowner and you also own your own business, then you can double dip on the tax savings by renting out your home to your own business.
If you’re hosting an event, meeting, or any work-related activity, instead of renting out a hotel, conference room, co-working space, or restaurant, you can use your own home to do the exact same things. As the homeowner, you have the same tax break as if you rented it out to somebody else. But as the business owner, you can also take a tax deduction on the amount you pay in rental fees to yourself.
Business owners can this loophole to transfer business income to personal income, and essentially double dip on the tax savings. As the homeowner, you get tax-free rental income from your business. As the business owner, you get a tax-deduction for the rental expense you paid to yourself.
As a business, you can only take this deduction if the home is your primary residence. The house must be under your name, and listed as your primary residence.
You can only rent out your home, tax-free, for up to 14 days. If you rent out your home for more than 14 days, any days outside of the 14 days would be considered a taxable event.
The IRS doesn’t let you just charge any ridiculous amount to rent out your home. For example, you cannot rent out your home to your own business for $10,000 per night when it would normally cost you $500 elsewhere. Your home rental cost should be consistent with other home rental prices in your area. The best way to accurately come up with a reasonable price is to check Airbnb listings for similar properties in your area.