Augusta Rule Section 280A: S Corp Client Playbook

Augusta Rule Section 280A: S Corp Client Playbook

If you advise S corporation owners, the Augusta rule section 280A how to implement for S corp clients question comes up every year. Section 280A(g) lets a homeowner rent a residence 14 days or fewer and exclude the rent from income. Meanwhile, the S corp deducts it. Therefore, the real value you deliver is documentation, not the idea itself.

Table of Contents

• Key Takeaways
• What Is the Augusta Rule Under Section 280A(g)?
• Which of Your Clients Actually Qualify?
• How Do You Implement the Augusta Rule for S Corp Clients?
• How Do You Set and Defend Fair Market Rent?
• What Documents Does the IRS Want to See?
• What Triggers an Audit Problem?
• How Much Should You Charge for This Engagement?
• Partner Spotlight: A Solo Practitioner Case Study
• Uncle Kam in Action: The Two Person S Corp
• Related Resources
• Next Steps
• Frequently Asked Questions

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Key Takeaways

• Section 280A(g) excludes rent from income when a residence is rented 14 days or fewer.
• The S corp deducts the rent on Form 1120-S as an ordinary business expense.
• Day 15 breaks the exclusion. Count every day carefully across the year.
• Three written comparables are the practical floor for defending the daily rate.
• Package the work as a priced advisory deliverable, not a free filing season favor.

What Is the Augusta Rule Under Section 280A(g)?

The nickname comes from Augusta, Georgia. Homeowners there rent out during The Masters each spring. Congress carved out a short term rental exclusion, and the name stuck. However, the statute itself says nothing about golf. It applies to any taxpayer who rents a residence for a short window.

Read the operative text at 26 U.S. Code Section 280A. The IRS also summarizes the rental day rules in Publication 527, Residential Rental Property. Furthermore, IRS Topic No. 415 confirms the under 15 day treatment in plain language.

Why the S Corp Changes the Math

A sole proprietor cannot rent a home to himself. There is no second party. Therefore, no deduction exists. An S corporation, by contrast, is a separate taxpayer for reporting purposes. It pays rent. It deducts rent. The shareholder receives the cash and excludes it.

That mismatch is the entire strategy. Money leaves the business as a deduction and arrives at the owner as nothing. As a result, the household keeps the full amount. Moreover, the rent is not wages, so no payroll tax applies to it.

Where This Fits in a Planning Sequence

This is a mid tier strategy. It is not a replacement for reasonable compensation work or retirement plan design. Nevertheless, it is fast, repeatable, and easy for clients to understand. Consequently, it is excellent as a first paid planning deliverable.

Many firms run it alongside entity structuring reviews for S corp owners. Similarly, it pairs well with accountable plan cleanup. You can see the full implementation framework on the Augusta Rule strategy page for tax pros.

Which of Your Clients Actually Qualify?

Start with entity type. The payer must be separate from the owner for tax purposes. Then look at business substance. Does the company hold board meetings, planning sessions, or team retreats? If the answer is no, do not manufacture them.

Entity Eligibility at a Glance

Screening Questions for Your Intake Call

• Does the client own or lease the residence personally?
• Is the S election active and properly filed?
• Are there real meetings the company already holds?
• Is the home large enough to host the stated group?
• Has the home already been rented to anyone this year?

That last question matters more than people expect. Days rented on a short term platform count toward the same 14 day pool. Consequently, a client who listed the lake house for ten nights in July has only four days left.

Most of your best fits are owner operated businesses with modest payrolls. They have profit, they have meetings, and they have a home that can host a small group comfortably.

How Do You Implement the Augusta Rule for S Corp Clients?

Here is the workflow I recommend you standardize. Build it once. Then run it the same way for every client file. As a result, review time drops and quality stays high.

The Seven Step Workflow

1. Confirm the entity type and the active S election.
2. Price the daily rate using three written comparables.
3. Adopt a board resolution approving the rental arrangement.
4. Sign a short written rental agreement between owner and company.
5. Hold the meeting and capture an agenda, attendees, and minutes.
6. Invoice the company from the owner for that specific date.
7. Pay by business check or ACH, and retain the bank record.

Notice that payment is a separate step. Many firms stop at the journal entry. However, an accrual without cash movement is a weak position. Therefore, insist the money actually moves before year end.

Where It Lands on the Returns

The S corp books rent expense. It flows through ordinary business deductions on Form 1120-S. The shareholder reports nothing on the Form 1040. There is no Schedule E entry when the exclusion applies cleanly.

Some practitioners issue a Form 1099-MISC for rent in Box 1. Others do not, since the income is excluded. Both positions appear in practice. If a 1099 is issued, report the amount on Schedule E and back it out with an offsetting line referencing Section 280A(g). Document your firm’s chosen position in writing.

Interaction With the Accountable Plan

Do not stack reimbursements on the same days. An accountable plan reimburses home office use across the year. The Augusta rental covers specific event days. Keep the two streams separate in the general ledger.

Furthermore, exclude the rented space from the home office calculation for those dates if you are being conservative. Clean separation beats clever overlap every time.

How Do You Set and Defend Fair Market Rent?

Rate is the number one audit pressure point. The IRS rarely argues that Section 280A(g) does not exist. Instead, examiners argue the rate was invented. Consequently, your comp file is the whole defense.

A Repeatable Three Comp Method

• Pull one quote from a local hotel meeting room of similar capacity.
• Pull one from an event venue or conference center nearby.
• Pull one from a short term rental or coworking space listing.
• Screenshot each quote with the date visible in the capture.
• Record capacity, square footage, and included amenities for each.
• Refresh the file once per year, before the first meeting date.

Adjust downward when the home lacks catering, parking, or AV equipment. Similarly, adjust downward when the venue quotes include staff. In short, the home should price below a full service venue, not above it.

Risk Tier Framework

Worked Example With Real Numbers

Assume three comps come in at $1,100, $1,250, and $1,400 per day. The average is roughly $1,250. Your client books 12 meeting days at $1,200 per day. Total rent equals $14,400.

The S corp deducts $14,400. The shareholder excludes $14,400. At a combined federal and state effective rate near 35 percent, the household keeps about $5,040 that would otherwise go to tax. Meanwhile, the only cash cost is your fee and a few hours of admin.

Run the same math across a book of 20 qualifying S corp clients. That is roughly $100,000 of aggregate client savings generated from one standardized process. Accordingly, this strategy belongs in your core advisory menu.

What Documents Does the IRS Want to See?

Build this as a checklist in your workflow software. Then make each item a required field. Nothing closes until every box is green.

Documentation Checklist Table

Keep a running day counter in the same folder. One tab. Fourteen rows. Mark each date as it is used. Consequently, nobody blows the limit by accident in December.

Strategies work best when they are sequenced rather than executed in isolation. That is why many solo firms now run every client through entity-aware tax planning software that evaluates the 1040, the 1120-S, and the K-1 together before any single strategy is recommended.

What Triggers an Audit Problem?

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The Tax Court has reduced Augusta Rule deductions where taxpayers charged far above any supportable rate. In those cases the strategy survived. The number did not. Therefore, rate discipline protects the whole position.

The Five Red Flags

• Daily rates far above local full service venue pricing.
• Minutes created in March for meetings held last August.
• Identical agendas copied across all 14 dates.
• A single year end lump payment with no invoices.
• Rent paid from the owner’s personal checking account.

Also watch the business purpose test. A family dinner is not a board meeting. Likewise, a holiday party is not strategic planning. Examiners read agendas closely, so write them honestly.

How an Exam Actually Unfolds

The examiner opens with an information document request. It asks for the lease, the invoices, and bank evidence. Next come the minutes and attendee records. Finally comes the question that decides everything. How did you determine the rate?

Firms that answer with a dated comp file usually close the issue quickly. Firms that answer with a shrug usually negotiate the number down. In other words, the comp file is the single highest value hour you spend on this engagement.

For the complete audit defense checklist and templates, review the Section 280A implementation resource for practitioners. It covers resolution language and invoice formats you can reuse.

How Much Should You Charge for This Engagement?

Here is the mistake solo firms make. They mention the strategy during a return review, email a one page summary, and bill nothing. Meanwhile the client captures five figures of savings. That is value leakage, and it compounds year after year.

Compliance Fees Versus Advisory Fees

Scoping the Deliverable

Sell a packet, not advice. Your deliverable should include the comp study, the resolution, the rental agreement, a year of agenda templates, the invoice set, and a day tracker. Clients can see and hold that. Consequently, the price feels fair.

Anchor the fee against savings. If the client keeps $5,000, a $2,500 setup reads as reasonable. Moreover, the maintenance fee renews automatically each year with almost no new work.

Firms that formalize this process usually expand into broader recurring tax advisory relationships within a year. The Augusta engagement is simply the door opener.

Partner Spotlight: A Solo Practitioner Case Study

This spotlight describes a representative solo practice, not a named individual. Picture an EA running a one person firm with 140 returns and 28 S corp clients. Revenue sits near $210,000. Filing season runs long, and margins stay flat.

She had mentioned the Augusta Rule to clients for years. However, she never charged for it. Clients would ask, she would explain, and the conversation ended there. Nothing was documented, and nothing was billed.

Then she built a standardized packet. One comp study template. One resolution. One agenda library. One invoice format. Building it took about nine hours. After that, each client file took roughly four hours to complete.

She offered the engagement to 28 S corp clients at $2,200. Eleven said yes in the first quarter. That produced $24,200 of new revenue from roughly 44 hours of work. Furthermore, each of those clients now renews maintenance at $900 annually.

The second order effect mattered more. Six of the eleven asked what else she could do. Three bought full planning engagements. Consequently, her advisory revenue grew faster than her compliance workload. She also learned how to position herself as a planning focused practitioner rather than a seasonal preparer.

Uncle Kam in Action: The Two Person S Corp

Here is a hypothetical example of how this works in practice.

Scenario. A married couple runs a marketing agency taxed as an S corporation. Net profit is about $240,000. They take reasonable wages of $90,000 each. They own a four bedroom home with a large dining area.

The Challenge. Their prior preparer filed returns accurately but offered no planning. The couple held real quarterly strategy sessions at home. Nevertheless, nothing was documented and nothing was deducted.

How Uncle Kam Would Approach It. First, confirm the S election and check for any prior rental days. Second, build a comp file from three local venues. Third, adopt a board resolution and sign a one page rental agreement. Fourth, schedule 12 genuine meeting dates across the year.

Illustrative Numbers. Suppose the three comps average $1,300 per day. The company sets the rate at $1,250. Twelve documented days produce $15,000 of rent. The S corp deducts $15,000 and the couple excludes it.

At a combined effective rate near 35 percent, the household could save roughly $5,250 for the year. The deduction also reduces pass through income, so the qualified business income calculation shifts slightly. Accordingly, model the full return before finalizing the day count.

Note that this illustration uses assumed figures. Actual outcomes depend on bracket, state law, and documentation quality. For real outcomes from documented engagements, review published client results and planning outcomes.

Related Resources

• Proactive tax strategy frameworks for advisors
• The MERNA method for strategy sequencing
• More tax planning articles for practitioners
• Tax preparation and filing support services
• Advanced planning for high net worth clients

Next Steps

Ready to turn this into billable work? Start small and standardize fast. You can review the full practitioner toolkit on the Augusta Rule implementation hub before your next client call.

• Pull a list of every S corp client in your book today.
• Build one comp study template you can reuse everywhere.
• Draft a resolution, agreement, and invoice set this week.
• Price the engagement at a flat fee with annual renewal.
• Offer it to five clients before the next quarterly deadline.

If you want the systems, training, and client flow behind this kind of work, explore what it takes to join the Uncle Kam tax pro network. You get the templates, the sequencing framework, and peer support from other solo practitioners.

Then take the direct route. Book a strategy session and we will map your S corp book, identify qualifying clients, and build your pricing model together. Bring your client list. Leave with a plan you can sell next week.

This information is current as of 10/20/2026. Tax laws change frequently. Verify updates with the IRS or your state agency if reading this later. This article is educational and is not individualized tax advice.

Frequently Asked Questions

Does the Augusta Rule work for an LLC taxed as an S corp?

Yes. The tax classification controls, not the state law form. An LLC with a valid S election files Form 1120-S and deducts the rent. The owner still excludes the income under Section 280A(g).

What happens if a client rents for 15 days?

The exclusion disappears entirely. All rental income becomes reportable, not just the extra day. The client then reports the full amount and allocates expenses. Therefore, track every day carefully throughout the year.

Should the S corp issue a Form 1099 for the rent?

Practice varies. Some firms issue Form 1099-MISC with rent in Box 1. Others skip it because the income is excluded. If issued, report it on Schedule E and offset it with a Section 280A(g) line.

Can a client use a second home or vacation property?

Yes, if it qualifies as a residence the client uses personally. However, the 14 day limit applies separately to each dwelling unit. Keep a separate day tracker for every property.

Can a client claim the home office deduction too?

Often yes, but keep the two separate. The accountable plan reimburses ongoing home office use. The Augusta rental covers specific event days. Do not reimburse and rent the same space on the same dates.

How long should clients retain the documentation?

Keep the full packet for at least seven years. Comp files, minutes, invoices, and bank records all belong in the same folder. Moreover, store them digitally so retrieval during an exam takes minutes.

How quickly can a firm launch this service?

Most solo practices build the template set in under two days. After that, each client file takes three to five hours. Consequently, you can offer the engagement within the same month you start.

Last updated: October, 2026