The Augusta Rule and the G-Wagon Write-Off: Two Famous Tax "Loopholes" and What They Really Take

Two tax tips travel through business-owner circles more than any others: rent your own house to your company for 14 days and pay no tax on the rent, and buy a heavy SUV, often a Mercedes G-Class, and deduct most of it in the first year. Both get called loopholes. Both are actually written into the tax code. The real questions are whether you meet the conditions and whether you can prove it.

The Augusta rule: renting your home for 14 days or fewer

The rule is Section 280A(g) of the Internal Revenue Code. If you use a home as a residence and actually rent it for fewer than 15 days during the year, the statute says no rental deductions are allowed and the rental income is not included in your gross income. The IRS puts it in plain terms: in that case, "don't report any of the rental income and don't deduct any expenses as rental expenses."

The nickname comes from Augusta, Georgia, where homeowners rent out their houses during the Masters golf tournament, as CPA Practice Advisor and Current Federal Tax Developments both describe. Any homeowner near a big event can use it that way. The version that gets attention online is the business owner's version: your company rents your home for meetings or retreats, the company deducts the rent as a business expense, and you leave the same rent off your personal return.

What happened when it was pushed too far

The best-known test is Sinopoli v. Commissioner, T.C. Memo. 2023-105, decided August 14, 2023. Three shareholders of an S corporation rented the common areas of their homes to the company for business meetings. The company deducted about $290,000 in rent over less than three years, including flat payments of $3,000 a month to each shareholder. The Tax Court allowed $16,500.

• No records. The shareholders offered no minutes, agendas, or calendars to show meetings happened, and the court found their testimony on how often they met inconsistent and not credible.
• An unsupported rate. One shareholder had set a rate of $1.83 per square foot with no appraisal. The IRS found local meeting space rented for about $500 for a half or full day, and the court called $500 a meeting "generous" given how little of each home was used.
• A deduction still has to be reasonable. The commentary on the case notes that Section 280A(g) controls what you report as income. It does not override the rule that a business deduction must be ordinary, necessary, and reasonable in amount.

What has to be true for the Augusta rule to hold up

Written rental agreements, payments from the business account to the owner, and comparable quotes from local venues are widely recommended practice. The statute itself doesn't mention paperwork, but Sinopoli shows that the paperwork is what decides the outcome.

The heavy-SUV write-off

This one comes down to weight. Federal tax law limits depreciation on "passenger automobiles," and Section 280F defines those as four-wheeled vehicles rated at 6,000 pounds or less, using unloaded gross vehicle weight for cars and gross vehicle weight for trucks and vans. A vehicle rated above that line is outside the passenger-car limits. That is the core of the "G-Wagon loophole." Relay, citing Kelley Blue Book, puts the Mercedes G-Class at a GVWR of roughly 7,055 pounds. The rating is on the sticker inside the driver's door, and it is the loaded weight rating, not the curb weight.

The figures come from Rev. Proc. 2026-15 for the passenger-car limits, Rev. Proc. 2025-32 for the $32,000 SUV cap, and IRS Publication 946, which notes that the 2025 law reinstated the 100% special depreciation allowance. Tax practitioners describe the two deductions stacking: Section 179 first, then bonus depreciation on the rest of the business-use cost, as in this explainer from Instead. The SUV cap applies only to the Section 179 election.

The conditions that make or break it

• More than 50% business use. Section 179 requires more than 50% business use in the year the vehicle is placed in service, per Publication 946. Only the business-use share of the cost is deductible, so 80% business use means 80% of the cost.
• Commuting is personal. Driving from home to a regular workplace counts as personal use, per Relay's summary of the rules.
• Recapture if business use drops. If the vehicle is placed in service with more than 50% business use but a later year falls to 50% or below, Section 280F(b) requires the excess depreciation to be added back to income.
• Selling later can cost you. Publication 544 explains that gain on business property may be taxed as ordinary income from depreciation recapture. Fully depreciated for tax purposes does not mean it sells tax-free.
• Taxable income limits Section 179. Practitioners note it generally can't create a business loss. Bonus depreciation has no such limit.
• Timing and state rules. The vehicle generally has to be placed in service, meaning ready and available for use, by December 31 to count for 2026. Some states, including California, don't fully conform to federal bonus depreciation, per 24/7 Wall St.

The burden of proof is on you. A contemporaneous mileage log, odometer readings at the start and end of the year, and the purchase paperwork showing the in-service date and GVWR are the evidence that a heavy SUV was a business asset. A luxury SUV that rarely leaves the driveway for work is the pattern that practitioners flag as an audit risk.

What both of them teach

• Do start with the question of whether the expense is real. If your company genuinely needs to hold meetings and your house works as a venue, or if you genuinely drive 70% of your miles for work, the tax rule is a bonus. If the expense exists only for the tax saving, it is the weakest version of the strategy.
• Do keep records at the time things happen. Notes written later, from memory, were the problem in Sinopoli.
• Do run the after-tax math. A deduction returns your tax rate on the amount, never 100 cents on the dollar. Buying a $100,000 vehicle to save $28,000 in tax is still a $72,000 net purchase.
• Don't treat a social media post as tax advice. Both strategies depend on facts that vary by business: entity type, income, state, how the asset is actually used.
• Don't set your own rental rate with no support or buy a vehicle in December you won't use until January. Both are failure patterns the sources above describe.

A tax professional who has seen your actual books can tell you whether either idea fits. The value of knowing the rules is asking the right questions and not being talked into a deduction that can't be defended.

More tax strategies built into the code

• Backdoor Roth IRA, Explained Without the Jargon
• Tax-Loss Harvesting: The Year-End Move Worth Understanding Before December 31
• Donating Appreciated Assets: The Tax Move Most People Never Make
• The HSA: The Most Underrated Retirement Account Nobody Maxes Out

Common questions

Is the Augusta rule legal?

Yes. It is Section 280A(g) of the Internal Revenue Code. If you use a home as a residence and rent it for fewer than 15 days in the year, the rental income is excluded from gross income and the rental deductions are not allowed. When a business pays the rent, the business deduction must still be ordinary, necessary, and reasonable.

How many days can I rent my home under the Augusta rule?

Fewer than 15 days during the tax year. At 15 or more rental days, the exclusion doesn't apply and the rental income has to be reported.

Why do heavy SUVs get a bigger deduction than regular cars?

Section 280F limits depreciation on passenger automobiles, defined as vehicles rated at 6,000 pounds or less. An SUV rated above 6,000 and up to 14,000 pounds is outside those limits, though its Section 179 deduction is capped at $32,000 for 2026. Bonus depreciation is a separate deduction.

Does a G-Wagon qualify as a business write-off?

It can, if its GVWR is above 6,000 pounds, which Relay, citing Kelley Blue Book, puts at roughly 7,055 pounds for the G-Class, and if you use it more than 50% for business. Only the business-use share of the cost is deductible, and you need records to prove it.

What is the Section 179 limit for SUVs in 2026?

$32,000 per vehicle for SUVs rated above 6,000 and not more than 14,000 pounds, under Rev. Proc. 2025-32. The overall 2026 Section 179 limit is $2,560,000, reduced once qualifying purchases exceed $4,090,000.