How to Deduct Home Office Expenses

Minnesota small business owners working from home can claim tax deductions for rent, utilities, or repairs, but IRS rules are strict. Proper expense tracking ensures compliance and maximizes savings. Shine FinOps, LLC, with Intuit-certified expertise, helps clients navigate deductions using tools like QuickBooks Online. This blog outlines five steps to deduct home office expenses legally in 2025.

Meet IRS Eligibility Rules

Your home office must be used exclusively and regularly for business—guest rooms don’t qualify. A dedicated space, like a spare room, meets IRS standards. A Minnesota freelancer we supported qualified a 200-square-foot office, saving $2,000 annually. Confirm your space meets IRS criteria before claiming deductions.

Calculate Your Office Space

Measure your office’s square footage and calculate its percentage of your home’s total area. For example, a 150-square-foot office in a 1,500-square-foot home is 10%. A Minnesota consultant we helped used this method to allocate $3,000 in rent deductions. Measure your space accurately for proper calculations.

Track Eligible Expenses

Log costs tied to your home office, like rent, utilities, or repairs. Use QuickBooks Online to categorize expenses under “home office” for tax prep. A Minnesota business owner we supported tracked $5,000 in utilities, boosting deductions. Maintain detailed records to support your claims.

Choose the Right Deduction Method

The IRS offers two methods: the simplified option ($5 per square foot, up to 300 square feet) or actual expenses (based on your percentage calculation). A Minnesota retailer chose the simplified method, claiming $1,500 easily. Compare methods to maximize savings based on your costs.

Retain Records for Audits

The IRS may audit home office deductions up to seven years back. Store bills, receipts, and a floor plan digitally using tools like Expensify, synced with QuickBooks. A Minnesota client avoided penalties by providing three years of records during an audit. Keep records organized for peace of mind.

Final Thoughts

Deducting home office expenses can save Minnesota small businesses thousands, but compliance is key. By meeting IRS rules, calculating space, tracking costs, choosing the right method, and retaining records, you maximize deductions. Shine FinOps, LLC offers tailored solutions to simplify the process. Book a free consultation today to optimize your tax savings.