The Augusta Rule: A Simple Tax Strategy for Healthcare Practice Owners

The Augusta Rule allows healthcare owners to legally rent their personal residence to their business for up to 14 days per year. The business gets a deduction. You receive the income tax-free. Yes, really. It comes from IRC Section 280A(g), which exempts rental income from a personal residence used 14 days or fewer per year from federal income tax, regardless of the rental rate charged.

This works well for practices that host staff training, planning days, or leadership meetings.

Here's what it looks like in practice. Say your practice holds a full-day quarterly planning meeting at your home, and a comparable local meeting space or short-term rental would reasonably run $750 a day. Four meetings a year at that rate moves $3,000 out of the practice and into your pocket tax-free, with the practice deducting the same $3,000 as a legitimate business expense. Stretch that to weekly staff training sessions within the 14-day cap, and the number scales accordingly. Same mechanism, bigger number, still tax-free as long as you stay under 15 days.

Step-by-Step Checklist:

1. Confirm Eligibility

The property is your personal residence

You use it 14 days or fewer per year

The meeting has a legitimate business purpose

Common healthcare uses:

Staff training or CE-style meetings

Annual planning or budgeting sessions

Leadership or management meetings

2. Schedule a Real Business Meeting

   The meeting should look like something you'd be comfortable explaining: who attended, why it was held, what was discussed. If it feels like a stretch, it probably is.

   
   

3. Set a Fair Daily Rental Rate

   Use local meeting space or short-term rental rates as a guide. Choose a rate your practice would reasonably pay elsewhere. This doesn't need to be perfect. It does need to be reasonable.

   
   

4. Document the Meeting

   Create a simple record that includes the date, location, purpose, attendees, and a brief agenda. A one-page document is plenty. Use our template.

   
   

5. Have the Pharmacy/Practice Pay You

   Payment must come from the business to you personally, by check, ACH, or bank transfer. Memo example: Facility rental, staff training. No cash. No "we'll account for it later."

   
   

6. Record It Properly

   The practice records the payment as rent or a meeting expense. You do not report the income personally if you stay under 14 days.

   
   

7. Track Your Days

   Keep a simple list of days used. Day 15 changes the tax treatment and ruins the opportunity.

   
   

Common Mistakes to Avoid

Using the rule for personal or social events, charging an inflated rental rate, skipping documentation or an agenda, forgetting to actually pay yourself, exceeding 14 days in a year, and assuming "everyone does this" counts as documentation. The IRS doesn't mind this rule. They mind sloppy execution.

Why Healthcare Owners Use This

It's a clean way to move money out of the practice with no payroll taxes and no personal income tax, and it's especially natural for practices that already hold team meetings or trainings.

You can download a copy of our Augusta Rule Documentation form on our Tools page.

If you have questions about this topic, speak with your CPA or accountant. And if you need guidance or a second opinion, you’re always welcome to contact us.

Check out our article: The KPIs That Decide a Pharmacy’s Profitability