Key takeaways
- Online Sellers file as 1099 / self-employed, so business expenses are deductible on Schedule C.
- Deductions cut both income tax and the 15.3% self-employment tax.
- The biggest write-offs for online sellers are listed below, with what each covers.
- You need receipts and a mileage log to claim them.
Tax write-offs for online sellers
Here are the deductions online sellers most commonly claim. Each one lowers your net profit, and therefore your tax:
| Deduction | What it covers |
|---|---|
| Cost of goods sold | What you paid for inventory or materials for items sold. |
| Shipping and postage | Labels, postage, and carrier costs to fulfill orders. |
| Packaging supplies | Boxes, mailers, tape, labels, and packing materials. |
| Platform and seller fees | Etsy, eBay, Amazon, and Shopify fees and subscriptions. |
| Payment processing fees | PayPal, Stripe, and card-processing charges. |
| Home office and storage | A dedicated work or inventory-storage space in your home. |
| Photography equipment | Camera, lighting, and props for product photos. |
| Mileage | Post office, supply, and sourcing runs at the IRS rate. |
| Advertising | Promoted listings, social ads, and marketing. |
| Software and tools | Listing, inventory, accounting, and design tools. |
How cost of goods sold (COGS) works for sellers
The money you spend to buy or make the products you sell is deducted as cost of goods sold, not as a regular expense. You track your inventory purchases and materials, and deduct the cost of the items actually sold during the year. Keeping clean records of what you bought, made, and sold is the core of a seller's bookkeeping and often the largest deduction.
Shipping, packaging, and platform fees
Postage and shipping labels, boxes, mailers, tape, and packing materials are fully deductible, as are the fees the platforms and processors take, Etsy, eBay, and Amazon seller fees, plus PayPal and Stripe processing. These small, frequent costs add up to a large deduction across a year of orders, so capture them as they happen.
How these deductions lower your tax
As a online seller, your tax is based on net profit, which is your income minus these business expenses. Because both self-employment tax and income tax are calculated on that profit, every dollar you deduct is taxed at neither rate, saving most contractors roughly 25 to 40 cents on the dollar. The catch is documentation: you can only deduct what you can prove, so capturing receipts and miles through the year is what turns this list into real savings.
See what these deductions save you with our free calculators, then let NeoReceipt make sure you capture every one.