If you’re a doctor, you already know the feeling of writing a big check to the IRS every April. Between W-2 wages, practice income, and limited deductions, it can feel like you’re constantly working for Uncle Sam.
The good news?
There are still a few overlooked strategies that can help physicians legally reduce their taxable income.
One of the most underused options is what’s known as the Augusta Rule, or the ‘14-day rule.’ It was originally designed for homeowners who rent out their houses during events like the Masters Golf Tournament in Augusta, Georgia. But The Augusta Rule For Doctors can be beneficial, especially for those who own their own practices. Understanding The Augusta Rule For Doctors can help physician-owners take full advantage of this little-known tax strategy.
Using this legal loophole, you can rent your personal residence to your medical practice for business use, while excluding that rental income from your personal taxes.
What Is The Augusta Rule?
If you rent out your personal home for 14 days or fewer in a year, the income you earn from that rent is not taxable. In other words, you don’t report it at all.
At the same time, if your practice pays you fair market rent for legitimate business use, like board meetings, compliance sessions, or strategy planning, it can usually deduct that rent as a business expense. The key is that the rate must be reasonable and the purpose must be clearly documented.
But here’s the catch: once you hit 15 or more days, the exclusion disappears. Your rental income becomes taxable, and you’ll have to track and allocate expenses like a traditional landlord.
When Does the Augusta Rule For Doctors Work Best?
This strategy works best when your medical practice is a separate legal entity, such as an S-corporation, C-corporation, or partnership. In that setup, your personal tax as an individual homeowner is separate from your practice. The entity rents the space from you for short, legitimate business purposes one of the key advantages of The Augusta Rule For Doctors.
If you’re a sole proprietor, though, the rule doesn’t quite fit. Since you and your business are treated as the same taxpayer, you can’t rent a space to yourself. In that case, you’d want to explore the home-office deduction, which operates under a completely different set of rules.
For group practices or physician partnerships, the Augusta Rule can be an elegant solution. Instead of booking hotels or conference rooms for quarterly meetings, you can host them at your home, keeping it under 14 days per year and properly documenting each use, demonstrating the benefits of The Augusta Rule For Doctors.
How to Set a Fair Rental Rate
The IRS expects you to charge fair market value (FMV) for the space you’re renting. That means the rent should reflect what another business would pay to use a comparable venue in your area.
An easy way to determine this is by gathering three quotes from local meeting spaces, like hotels, coworking centers, or event studios. If a hotel charges $1,100 for a half-day conference room and a coworking space charges $950, your home might reasonably be valued at something in that range. Use the average or median of the quotes and keep screenshots or PDFs of the quotes as proof—an important step when applying The Augusta Rule For Doctors.
It’s also smart to write a brief memo explaining how you arrived at your number. That simple note can make a big difference if your return is ever reviewed.
How to Put the Augusta Rule into Action
Start by planning the meetings your practice genuinely needs throughout the year. These could include quarterly leadership meetings, board sessions, compliance reviews, or budget discussions. As long as you stay under 14 total days of rental use for the year, you’re within the safe zone.
Next, create a short rental agreement between yourself (as the homeowner) and your practice entity. It doesn’t need to be fancy; a page or two listing the property address, rooms used, dates, times, and agreed-upon rate is enough. The agreement should clarify that the space is being used solely for business meetings and not for personal or social events.
For each meeting, prepare an agenda and an attendee list ahead of time. Afterward, jot down simple minutes with key discussion points or decisions made. Taking one or two photos of the meeting can also help document the business purpose.
Finally, issue an invoice from yourself to your practice and have your practice pay from its business account. If the total rent for the year exceeds $600, your practice should issue a Form 1099-MISC to you by January 31. You’ll keep that form in your records, but you won’t include the income on your tax return because The Augusta Rule For Doctors excludes it entirely. Properly following The Augusta Rule For Doctors ensures you maximize this tax benefit without running afoul of IRS rules.
Why The Augusta Rule Makes Sense For Doctors
Most doctors have few levers to pull when it comes to reducing taxable income. Your income is typically active, highly scrutinized, and subject to multiple layers of tax. The Augusta Rule is one of those rare opportunities that fit naturally into how most practices already operate. For more guidance on structuring retirement options, see our article on Retirement Plans For Doctors (Solo vs. Employees).
If you already hold regular meetings or strategy sessions, simply shifting them to your home can unlock thousands in tax-free benefits every year. It’s compliant and surprisingly easy once you set up the process.
Final Thoughts
Remember, tax laws can change, and each state has its own rules. It’s best to check with your accountant before applying the Augusta Rule.
At MedTax, we help physicians apply strategies like this the right way, so you can reduce your tax bill without taking unnecessary risks. We work with doctors all year round on tax planning to ensure they keep more of what they earn.
In fact, if you’re relying on generic tax prep, you’re likely paying more taxes than you should. We’re so confident we can fix that, we guarantee a 200% return on your tax plan investment, or we’ll refund the difference.
Schedule a free discovery call with us today.
Until next time!
