Online seller tax deductions: the complete list for 2026
Your 1099-K shows gross sales. Your actual tax bill is based on net profit — gross sales minus every legitimate business deduction. The difference can be enormous. Most online sellers leave money on the table because they don't know what they can deduct. Here's the complete list with real dollar amounts.
In this guide
How deductions work on Schedule C
Every deduction on this list reduces your net profit on Schedule C (Form 1040). A lower net profit means less federal income tax and less self-employment tax (15.3%). At a combined 30% effective rate, every $1,000 in deductions saves you approximately $300.
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Cost of goods sold (COGS) — the largest deduction
COGS is reported on Schedule C, Line 4 and detailed in Part III. It's subtracted from gross revenue before calculating gross profit.
Inventory purchased for resale
Varies — often 30–60% of gross revenue for resellers
Every dollar you spend buying inventory to resell — thrift store finds, wholesale lots, retail arbitrage purchases, estate sale acquisitions — is deductible as COGS. Keep receipts for every purchase.
Raw materials and supplies (handmade sellers)
Varies — track every material purchase
Fabric, yarn, beads, wood, resin, paint, clay, paper, ink, packaging components, and any other materials that go directly into your products. These are COGS, not general expenses.
Inbound shipping and freight
100% deductible as part of COGS
Shipping costs to receive inventory — wholesale supplier shipping, Amazon FBA inbound shipping, import duties, and customs fees — are part of cost of goods sold.
COGS tracking tip
The IRS expects you to track beginning and ending inventory. Year-end formula: beginning inventory + purchases during the year − ending inventory = cost of goods sold. A spreadsheet with date, item, cost, and supplier is sufficient.
Get the printable deductions checklist (PDF)
Every deduction on this page in a one-page checklist you can reference all year. Includes the Schedule C line numbers.
Platform fees and selling costs
Marketplace commissions and transaction fees
100% deductible — typically 6–20% of gross sales
Every fee your platform charges: Etsy's 6.5% transaction fee + $0.20 listing fees, Amazon's 8–15% referral fee, eBay's up to 13.25% final value fee, Poshmark's 20% commission, Shopify processing fees. Your 1099-K includes revenue before these fees — they are your deduction.
Payment processing fees
100% deductible — typically 2.9% + $0.30 per transaction
Stripe, PayPal, Square, Shopify Payments processing fees. Separate from marketplace commissions and fully deductible.
Platform subscriptions
100% deductible
Shopify plans ($39–$399/month), eBay Store subscriptions ($4.95–$299.95/month), Amazon Professional Seller ($39.99/month). Schedule C, Line 18 or Line 27a.
Shipping and fulfillment
Outbound shipping (postage and carrier fees)
100% deductible
Every dollar shipping orders to customers — USPS, UPS, FedEx — through Pirate Ship, Stamps.com, ShipStation, or the post office. If you charge customers for shipping, that revenue offsets this on Schedule C.
Shipping supplies and packaging
100% deductible
Boxes, poly mailers, bubble wrap, tissue paper, tape, labels, printer ink, custom packaging, branded stickers, thank-you cards.
FBA fees (Amazon sellers)
100% deductible
Fulfillment fees, monthly storage fees, long-term storage fees, removal/disposal fees. Download your fee summary from Seller Central at year end.
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Advertising and marketing
Paid advertising
100% deductible
Facebook/Instagram ads, Google Shopping ads, Etsy Ads, Amazon PPC, Pinterest Promoted Pins, TikTok ads. Schedule C, Line 8.
Photography and content creation
100% if used exclusively for business
Camera, lighting, backdrops, photo editing software (Lightroom, Canva), tripods, ring lights. If also used personally, deduct the business-use percentage.
Home and workspace
Home office deduction
$5/sq ft simplified (max $1,500) or actual expenses pro-rated
Dedicated space used regularly and exclusively for your business — packing, photographing, managing listings. See our detailed home office guide for which method saves more.
Storage space (off-site)
100% deductible if used exclusively for inventory
Storage unit, garage, or warehouse space rental for inventory. Includes monthly rental and insurance on stored inventory.
Technology and software
Internet and phone
Business-use percentage of monthly bills
$80/month internet at 50% business use = $480/year. $65/month phone at 60% business use = $468/year.
Software and app subscriptions
100% deductible if used for business
Accounting (QuickBooks, Wave, Xero), inventory (Craftybase, inFlow), cross-listing (List Perfectly, Vendoo), sales tax (TaxJar, Avalara), bookkeeping (A2X), shipping (ShipStation), research tools (Jungle Scout, Helium 10, eRank).
Computer and equipment
Business-use %, or full cost under Section 179
Laptop, printer, label printer, scanner. If used exclusively for business, deduct the full cost in the year of purchase under Section 179.
Vehicle and travel
Mileage to source inventory
67¢ per mile (2025 IRS rate; 2026 rate typically similar)
Miles to thrift stores, estate sales, garage sales, wholesale suppliers, post office, shipping drop-offs. 5,000 miles = $3,350 deduction. Track with Stride or MileIQ.
Professional and financial
Self-employed health insurance
100% of premiums
If you pay for your own health, dental, or long-term care insurance and aren't eligible for an employer plan through a spouse, 100% of premiums are deductible above the line — even without itemizing.
Retirement contributions
SEP IRA: up to $69,000 | Solo 401(k): up to $70,000 for 2026
Contributions reduce taxable income dollar for dollar. A seller earning $60,000 net can contribute ~$11,100 to a SEP IRA. The Solo 401(k) allows employee deferrals up to $23,500 plus employer contributions.
Tax preparation fees
Business portion deductible
The portion of your CPA or tax software cost attributable to your Schedule C is deductible on next year's return.
Business insurance
100% deductible
Product liability insurance, business owner's policy (BOP), and any other insurance purchased for your e-commerce business.
Real example: $45,000 gross eBay reseller
Gross sales (per 1099-K): $45,000. After deductions:
- COGS (inventory): $16,200
- eBay fees (12% avg): $5,400
- Shipping supplies and postage: $4,100
- Home office (200 sq ft simplified): $1,000
- Mileage (4,800 mi × $0.67): $3,216
- Internet/phone (50%): $870
- Software subscriptions: $360
- Photography equipment: $280
- Health insurance: $4,800
Total deductions: $36,226. Net profit: $8,774. SE tax: ~$1,240. Income tax (12% bracket): ~$780. Total federal tax: roughly $2,020 — a 4.5% effective rate on $45,000 gross.
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