The Augusta Rule for Indiana S-Corp Owners

A 2026 CPA's Guide to §280A(g) Rent, Documentation, and Audit Defense 

In Sinopoli v. Commissioner, T.C. Memo 2023-105, three Mississippi business owners deducted $290,900 of "rent" their S-Corp paid to use the shareholders' homes for monthly meetings. The Tax Court allowed $16,500 — granting $6,000 each for 2015 and 2016 (12 substantiated meetings × $500) and $4,500 for January–September 2017 (9 meetings × $500). The remaining ~$274,000 was disallowed. That's the cautionary tale most "Augusta Rule" articles skip. The strategy is real, the savings are real, but the documentation has to hold up. 

If you're an Indiana S-Corp or LLC owner, the Augusta Rule (IRC §280A(g)) lets you rent your home to your business for 14 days or fewer per year and exclude the rent from your personal income — while the business deducts the payment. Done right, a Westfield owner can capture $3,000–$10,000 of legitimate Augusta Rule rent annually — translating to roughly $700–$1,200 per year in real federal and Indiana tax savings. Done wrong, you get Sinopoli. 

What §280A(g) Actually Says 

The statute is short: if a dwelling unit is used as a residence and is rented for fewer than 15 days during the year, the homeowner doesn't deduct rental expenses and doesn't include the rental income in gross income. The 14-day threshold has never been indexed for inflation, and the One Big Beautiful Bill Act (P.L. 119-21) didn't touch §280A. Day 15 disqualifies the entire year and pulls the property into vacation-home rules — there is no partial relief. 

Who Actually Benefits — The Entity Question 

This strategy only works when the business and the homeowner are separate taxpayers.

The deduction-and-exclusion mechanic is what creates the savings; if both sides of the transaction land on the same Form 1040, you've accomplished nothing. 

Entity	Result
S-Corp	Deduction on Form 1120-S reduces K-1 ordinary income; rent excluded on owner's 1040. Net savings.
Multi-member LLC / partnership	Same mechanic via Form 1065 K-1. Net savings.
C-Corp	Deduction at corporate level; rent excluded individually. Net savings, rare structure.
Sole proprietor / single-member disregarded LLC	Schedule C deduction and Schedule E income on the same 1040. Net zero. And attempts to "make it work" by hastily converting to an S-Corp on the advice of a tax-strategy promoter — exactly the fact pattern in Jadhav v. Commissioner, T.C. Memo 2023-140 — produce the worst outcome: full disallowance plus accuracy-related penalties under §6662(a).

 If you haven't elected S-Corp status, this is one more reason to consider it. (See our S-Corp vs. Sole Proprietor post for the full break-even analysis.) 

The Math: A Defensible Westfield Example 

A Westfield S-Corp owner holds four quarterly board meetings at their home. Daily rate: $1,000 (supported by three documented Airbnb whole-home daily rates for comparable executive-tier homes in Westfield, Carmel, and Noblesville — more on that below). Annual rent: $4,000. 

For an owner in the 24% federal bracket plus Indiana 2.95% state and Hamilton County 1.10% LIT: 

• Federal benefit (rent deduction): $4,000 × 24% = $960 

• QBI offset (rent reduces Qualified Business Income for non-SSTB owners under the §199A threshold): $4,000 × 20% × 24% = ($192) 

• Net federal: $768 

• Indiana state: $4,000 × 2.95% = $118 

• Hamilton County LIT: $4,000 × 1.10% = $44 

• Total real savings: ~$930/year 

For an SSTB owner above the §199A phase-in ceiling (where QBI is already zero), the QBI offset disappears and the savings rise to roughly $1,120. Either way: not transformative on a single rental, but compounded across years and stackable with other strategies. 

Setting a Defensible Daily Rate 

This is where Sinopoli's lesson hits hardest. The court allowed only $500/day because the taxpayers had no real comparable analysis. The most defensible approach in Hamilton County is to anchor your daily rate to Airbnb whole-home daily rates for comparable executive-tier homes in Westfield, Carmel, Fishers, or Noblesville — properties with similar square footage, bedroom count, neighborhood, and amenities. Save dated screenshots of three listings for each rental day. 

Based on actual Hamilton County Airbnb whole-home rates, a defensible daily-rate range is roughly $500–$2,000 per day for typical executive-tier residences. Larger event-capable homes (lake property, dedicated entertainment space, 5,000+ sq ft) can support $2,000–$3,000/day if the Airbnb comparable specifically markets to corporate retreats or events. Above $3,000/day for a typical Hamilton County home, you're in territory the IRS audits and the Tax Court rejects. 

Important caveat. Airbnb whole-home rates are the cleanest comparable when the use actually matches whole-home occupancy — multi-day retreats, overnight strategy sessions, or large-group meetings where participants use kitchen, multiple rooms, and outdoor space. For a four-hour daytime board meeting in one room of the house, the IRS may argue the proper comparable is hotel meeting space (lower daily rates). For those use cases, supplement your Airbnb comps with at least one meeting-space comparable so the file is defensible under either framing. 

The $5,000–$25,000/day rates promoted on TikTok and by some "tax strategy" influencers are not survivable under §162 reasonableness — those rates aren't supported by any Hamilton County Airbnb listing for any property. The fact pattern that loses in Tax Court — every time — is aggressive daily rate plus thin documentation. 

The Documentation Checklist 

These are the items your CPA will ask for if the deduction is questioned. Assemble them before the rental, not after a notice arrives: 

1. Written venue-use agreement signed before the rental day, specifying date, purpose, square footage, daily rate 

2. Board or manager meeting minutes approving the rental and identifying business purpose 

3. Three local comparables — dated screenshots of Airbnb whole-home daily rates for executive-tier homes in Westfield, Carmel, Fishers, or Noblesville with similar square footage, bedroom count, and amenities. For daytime-only meetings, include at least one meeting-space comparable as a fallback 

4. Invoice from homeowner to business for each rental day 

5. Agenda and attendee list matching real participants and decisions made 

6. Substantive deliverables — slides, decisions, signed documents from the meeting 

7. Bank transfer (not cash) from business operating account to homeowner's personal account, memo line referencing "§280A(g) facility rental — [date]" 

8. Day-count tracker showing total rental days for the year 

9. Form 1099-MISC issued by the business if total annual rent paid to you is $2,000 or more (the OBBBA-raised threshold for 2026; previously $600). Below $2,000, no 1099 required. (See our [OBBBA 8 Changes post](/obbba-overview) for the broader 1099 rules.) 

10. Insurance rider confirming your homeowner's policy permits occasional business use 

The §280A(c)(6) Question (And Why §280A(g) Still Wins) 

Some readers will know that §280A(c)(6) generally disallows deductions on rentals from an employee to their own employer. The statutory tension is real, but §280A(g) opens with "Notwithstanding any other provision of this section or section 183" — which is read to override (c)(6), since (c)(6) is itself a provision of §280A. Beyond the statutory text, board meetings and shareholder strategy sessions aren't "performing services as an employee" — they're functions performed in shareholder, director, or manager capacities. The Sinopoli court didn't dispute the shareholder-level §280A(g) exclusion; the entire fight was over the corporation's §162 deduction. 

The Disguised-Distribution Risk 

Beyond the §162 reasonableness question, there's a separate risk Sinopoli flagged: the IRS can re-characterize "rent" as a disguised distribution to the shareholder (creates personal tax exposure) or as wages (triggers payroll tax). The court characterized the Sinopoli payments as a tax savings scheme to distribute the S-Corp's earnings through purported rent payments. Three patterns invite this attack: (a) identical monthly rent amounts that look like a salary/distribution stream, (b) payments to family-only "meetings" without genuine business purpose, and (c) round-number daily rates with no comparable support. 

The Five Mistakes That Trigger Audits 

1. Charging more than comparables support (Sinopoli's lesson) 

2. Hitting day 15 — the exclusion is binary; one extra day taxes everything 

3. Using the rule as a sole proprietor (net-zero at best, fraud-flavored at worst) 

4. Reconstructing documentation after audit notice — Tax Court judges spot this consistently 

5. Cash payments or commingled accounts — related-party transactions get heightened scrutiny 

Indiana-Specific Notes 

Indiana uses federal AGI as the starting point and updated its IRC conformity to January 1, 2026 under Senate Bill 243 (signed March 5, 2026). Income excluded under §280A(g) is therefore not in Indiana AGI. No state add-back applies. Hamilton County LIT for 2026 is 1.10% (Indiana DOR Departmental Notice #1, R46/01-26). 

Two Indiana issues are unsettled and worth flagging with your advisor before a multi-day rental: Westfield Zoning Ordinance Article IV §32 (short-term rental restrictions — generally aimed at overnight Airbnb-style rentals, not daytime business meetings, but the line is fuzzy), and Hamilton County's 8% innkeeper's tax under IC 6-9-56 (probably not triggered for daytime corporate meetings, but the casual-renter exemption mechanics are worth confirming for multi-day or overnight uses). Characterize the lease as a venue-use agreement for business purposes, not a "short-term rental," and avoid overnight stays where possible. 

What You Should Do Now 

If you have an S-Corp or multi-member LLC and you're already holding occasional board meetings or strategy sessions: document them properly, set a defensible daily rate against three local comparables, sign a venue-use agreement before each rental, pay by bank transfer, and stay under 14 days. If you're a sole proprietor: this strategy doesn't work for you — but our [S-Corp vs. Sole Proprietor post](/scorp-vs-sole-prop) covers the income threshold where electing S-Corp status starts to make sense. 

A realistic Hamilton County S-Corp owner can capture $3,000–$10,000 of legitimate Augusta Rule rent annually with clean documentation. The savings aren't life-changing in any single year, but they compound, and the structure is straightforward once it's built. If you'd like us to set up the documentation framework for your situation, call us at 317.867.5427. 

This post provides general information about federal and Indiana tax law as of April 2026 and is not tax advice for your specific situation. Local Indiana zoning and innkeeper's tax issues should be confirmed with the local authorities before relying on any specific characterization. Every taxpayer's facts are different — please consult a qualified tax advisor before acting on any of the strategies discussed above.