You can legally pay yourself $21,000 in tax-free income using the Augusta Rule—but most contractors have no idea how.

Here’s the strategy:

Rent your home to your S-corp for business meetings, staff retreats, or employee events for 14 days or less per year. The corporation deducts the full rental payment. You report ZERO income from the rental. It’s completely tax-free.

Example: Assume fair rental value of your home = $1,500/day. Rent it to your S-corp for 14 days = $21,000 deduction to the business, $21,000 tax-free to you.

The IRS confirmed this works. It’s not a loophole.

But here’s where contractors blow it:

Two business owners tried to deduct $290,900 and $308,000 in rent. Both failed in Tax Court. Why? They couldn’t prove fair rental value or legitimate business use.

What you MUST do:
✓ Get a rental appraisal proving fair market rent
✓ Document the business activity (record meetings, keep transcripts)
✓ Use for business purposes only (NOT entertainment)

Done right, this is one of the cleanest tax strategies available.



Disclaimer: This content is provided for educational purposes only and is not legal, tax, accounting, or financial advice. Every situation is unique, so consult your own attorney, CPA, or financial advisor before making decisions based on this information.