Can You Rent Your Home to Yourself for 14 Days?

Using your own home as a rental property might seem unusual, but the IRS allows homeowners to rent their homes for up to 14 days per year without reporting the income. This is known as the “Augusta Rule,” originally designed to benefit residents of Augusta, Georgia, during major sporting events.

While this tax rule can be useful, homeowners must meet specific conditions to comply with IRS regulations. Setting a fair rental rate, properly documenting the arrangement, and understanding tax obligations are essential.

Eligibility Requirements

To qualify for the 14-day rental exemption, the property must be classified as a personal residence rather than a full-time rental or business asset. The IRS defines a personal residence as a home where the owner resides for more than 14 days or at least 10% of the total days it is rented out during the year. Properties primarily used for rental purposes fall under different tax rules, including depreciation and expense deductions.

The rental arrangement must be legitimate, with a clear distinction between personal and rental use. If the home is owned through a business entity, such as an LLC or S corporation, the tax benefits may not apply in the same way. The IRS closely examines transactions between related parties, so the rental must reflect a fair market arrangement.

Setting a Rental Rate

The IRS requires that rental rates between related parties reflect fair market value. Setting an arbitrary or inflated rate can attract scrutiny.

One way to determine an appropriate rental price is by researching short-term rental listings for similar homes in the same area. Platforms like Airbnb and Vrbo provide real-time data on what guests are paying for comparable properties. If the home is in a high-demand location during major events, rates may be higher, but they must be justifiable.

For additional support, homeowners can hire a professional appraiser or request a rental market analysis from a real estate agent. These professionals assess neighborhood trends, seasonal demand, and property features to determine a reasonable daily rental rate. Third-party documentation strengthens the homeowner’s position in case of an IRS inquiry.

Documentation

Thorough records help substantiate the legitimacy of the rental arrangement, especially when dealing with related parties. A formal rental agreement should outline key terms such as the rental period, payment terms, and permitted use of the property.

Payments should be made through traceable methods, such as bank transfers or checks, rather than cash, to create a verifiable paper trail. The homeowner should issue an invoice detailing the rental charges and payment due dates. If the rental is arranged through a corporate entity, board meeting minutes approving the rental may be necessary.

Supporting evidence from third-party sources further strengthens the credibility of the rental arrangement. Comparable rental listings, independent property valuations, or statements from real estate professionals can help validate that the rental rate was set at fair market value. Keeping records of correspondence related to the rental, such as emails confirming booking details, adds another layer of documentation in case of an IRS audit.

Tax Reporting Obligations

Income from short-term rentals is generally taxable, but under IRS rules, homeowners can exclude rental earnings if the property is rented for 14 days or fewer per year. Since this income is not reported on Form 1040, it does not increase taxable income or trigger self-employment tax. However, if the rental exceeds 14 days, all rental income must be reported.

Despite the exclusion from gross income, related expenses—such as utilities, maintenance, or property management fees—cannot be deducted against other income sources. This differs from rental properties, where landlords can claim depreciation, mortgage interest, and operating costs on Schedule E.

If the homeowner rents the property to a business they own, the business can deduct the rental expense, but the arrangement must be supported by a legitimate rental agreement and fair market valuation. The IRS scrutinizes these transactions to prevent tax avoidance.

Coordination With Personal Deductions

Using the 14-day rental exemption affects how certain personal deductions are claimed, particularly mortgage interest and property taxes. Since the home remains classified as a personal residence, these deductions are still allowed, but the portion of the property used for rental purposes cannot be separately deducted as a business expense.

Mortgage interest deductions must be reported on Schedule A rather than Schedule E, which is used for rental properties. The IRS allows deductions on mortgage interest for loans up to $750,000 for married couples filing jointly ($375,000 for single filers), but this applies only to primary and secondary residences. Property taxes are also deductible under state and local tax (SALT) deductions, though they are capped at $10,000 per year.

If the home is rented to a business owned by the homeowner, the business can deduct the rental expense, but the homeowner cannot claim additional deductions beyond what is normally allowed for personal residences.