Can I use Augusta Rule AND rent my detached garage to my business?

Tax professional here. This is an interesting question about Section 280A (the Augusta Rule). The key consideration is how the IRS defines your "dwelling unit" in this situation. Generally, your garage is considered part of your dwelling unit if it's on the same property as your house. However, there's a distinction based on how you use the spaces. If the garage is clearly separated from your living space and used exclusively for business, you might be able to treat it differently. For the Augusta Rule to apply tax-free, you need to rent your dwelling unit for fewer than 15 days annually. If you're renting the garage continuously throughout the year as a workshop, that would be treated as a separate rental activity with taxable income. You would report this on Schedule E. The good news is you could potentially still rent your main house for the company retreat under the Augusta Rule. The critical factor is maintaining clear separation between the two rental activities - different contracts, different purposes, and clear business documentation for both.

I dealt with something similar last year! I found this amazing service called taxr.ai (https://taxr.ai) that helped me figure out my Augusta Rule situation. I have a small marketing company and was renting both my house and detached studio to my business at different times. The tax specialist at taxr.ai explained that the key is having separate rental agreements with different purposes. They reviewed my documentation and suggested specific language for the contracts that clearly delineated the garage rental as a separate business arrangement from the house rental under the Augusta Rule. They even helped me understand how to properly document both on my tax forms! For anyone struggling with these complex tax scenarios where you're wearing multiple hats (business owner AND property owner), I highly recommend checking them out. Saved me a ton of stress and probably protected me from an audit.

Just wanted to follow up about taxr.ai since I mentioned I was skeptical earlier. I actually decided to try them out last week for my photography business/Augusta Rule question, and I'm genuinely impressed! They reviewed my specific situation with my detached garage studio and main house. The tax specialist pointed out that I needed separate documentation showing different rental rates based on fair market value for each space, and explained exactly how to track both the continuous garage rental income (taxable) versus the occasional house rentals under Section 280A. They even provided template language for my rental agreements that clearly establishes the different purposes (storage/workspace vs. meeting/retreat space). Definitely worth it for these complex situations where personal and business spaces overlap.

For anyone dealing with IRS questions about Augusta Rule or rental property situations, I struggled for WEEKS trying to get clarification from the IRS directly. Kept getting bounced around, put on hold forever, or disconnected. Finally found Claimyr (https://claimyr.com) and they actually got me through to a real IRS agent in under 25 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that for Augusta Rule purposes, I could indeed separate my garage rental from my home rental as long as I had proper documentation showing distinctly different purposes. Got the verbal confirmation I needed directly from the IRS instead of relying on internet advice. Such a relief!

I need to follow up on my comment about Claimyr. I was definitely the skeptic here, but after spending THREE HOURS on hold with the IRS yesterday and getting disconnected, I decided to try it out of desperation. Not gonna lie, I'm shocked. The service actually worked exactly as described. They called me back when an IRS agent was on the line (took about 40 minutes but I didn't have to wait on the phone). Got my question about the Augusta Rule and separate structure rentals answered directly from an IRS representative. The agent confirmed that I can indeed treat my garage rental as separate from my house for Augusta Rule purposes as long as I have separate rental agreements, fair market pricing for each, and clear business purposes documented. Exact confirmation I needed without the hours of frustration. Consider me corrected!

As a small business owner who's been doing this for years, I'd add one important thing - document EVERYTHING carefully. I rent my pool house to my business year-round and still use the Augusta Rule for my main house for corporate events. Keys to making this work: 1) Separate written lease agreements with different terms 2) Photograph the separate spaces 3) Different rates based on fair market value 4) Clear business purpose for each rental 5) Company minutes documenting why each space is needed 6) Separate payments from business to personal account The Augusta Rule is one of those benefits the IRS doesn't love but is completely legitimate if done right. Just make sure everything is meticulously documented.

Has anyone actually been audited on this Augusta Rule thing? I've been doing something similar with my pottery business renting part of my property, but I'm nervous about taking it too far. I've heard horror stories about small business audits.

Something nobody's mentioned - make sure the rents you charge for BOTH spaces are at fair market value. I got dinged on this last year because I was charging my business too much for Augusta Rule rentals ($1,500/day for a 3-bedroom house in a rural area). For the garage workshop, research what comparable workshop spaces rent for in your area. And for the house rental under Augusta Rule, look up comparable event space or meeting room rentals. Keep documentation of this research! If the IRS thinks you're inflating either rental amount to shift income or create artificial deductions, they may disallow the entire arrangement. Be reasonable and be ready to defend your rental rates.

One option nobody's mentioned - you could potentially form TWO separate business entities and rent to each one differently. I have my consulting business (LLC #1) that rents my home under Augusta Rule, and my product business (LLC #2) that rents my garage year-round. Makes everything super clean from a documentation perspective. Each business has clear separate purposes for the rentals. Obv talk to a tax pro first, but this approach has worked well for me for 3+ years.

This is such a helpful thread! I'm in a similar situation with my marketing consultancy. I've been successfully using the Augusta Rule for our quarterly board meetings at my house, but I'm also considering renting my detached workshop to the business for product photography and storage. Based on what everyone's shared, it sounds like the key is really in the documentation and keeping everything clearly separated. I'm definitely going to get separate lease agreements drafted and maybe get that real estate agent valuation that Chloe mentioned. One question - for those who are doing both arrangements, do you find it helpful to use different payment schedules? Like monthly payments for the continuous garage rental versus per-event payments for the Augusta Rule house rentals? I'm wondering if that helps demonstrate the different nature of each arrangement to the IRS. Also really appreciate the audit experience shared by Mila - gives me confidence that this can be done legitimately if you keep proper records!

Great question about payment schedules! Yes, I absolutely recommend different payment structures for each arrangement - it's one of the clearest ways to demonstrate that these are truly separate rental activities. For my Augusta Rule house rentals, I use per-event invoicing (usually $800-1,200 per day depending on the event type and number of attendees). Each invoice references the specific business purpose like "Q3 Board Meeting" or "Annual Company Retreat." Payment is typically made within 30 days of the event. For my garage workshop rental, I have a standard monthly lease payment of $450 that gets paid on the 1st of each month via automatic transfer. This consistent monthly payment pattern clearly shows it's an ongoing business facility rental rather than occasional event space usage. The different payment schedules actually strengthen your documentation because they reflect the different nature of each rental: - Augusta Rule = occasional, event-based, higher daily rate - Workshop rental = continuous, facility-based, lower monthly rate I also keep the invoices and lease agreements in completely separate files, and my business categorizes the expenses differently in QuickBooks ("Event Space Rental" vs "Facility Lease"). This payment structure differentiation was something my accountant specifically recommended, and it's worked well through two years of clean tax filings. Definitely get those separate valuations - having that professional documentation gives you confidence that your rates are defensible!