Tax · DeductionsReviewed by Vincent Wesley CoueyUpdated October 2026 · 16 min read
Online seller tax deductions: the complete list for 2026
Last reviewed: October 18, 2026Next review due: January 18, 2027 (YMYL 3-month)
Reviewed by Vincent Wesley Couey, CeoCult Editorial Team
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.
Bottom line up front
Biggest deduction: Cost of goods sold (COGS), often 30-60% of gross revenue for resellers, is reported on Schedule C, Line 4 and detailed in Part III.
Selling costs: Marketplace commissions, payment processing fees, platform subscriptions, outbound shipping, packaging, and Amazon FBA fees are all 100% deductible.
Home, vehicle, and retirement: The home office deduction is $5/sq ft simplified (max $1,500) or actual expenses; mileage is 76 cents per mile from 1 July 2026; a SEP IRA and a Solo 401(k) each allow up to $72,000 for 2026.
Why it adds up: Every deduction reduces net profit on Schedule C, and at a 30% effective rate every $1,000 deducted saves about $300.
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.
Track every deduction automatically
QuickBooks Solopreneur categorizes your business expenses as you spend, so nothing falls through the cracks at tax time.
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.
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.
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
76¢ per mile (IRS rate from 1 July 2026; 72.5¢ for 1 January to 30 June)
Miles to thrift stores, estate sales, garage sales, wholesale suppliers, post office, shipping drop-offs. 5,000 miles split evenly across 2026 = about a $3,713 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 $72,000 | Solo 401(k): up to $72,000 for 2026 (plus catch-up if 50+)
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 $24,500 for 2026 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 (2,400 mi × $0.725 + 2,400 mi × $0.76): $3,564
Internet/phone (50%): $870
Software subscriptions: $360
Photography equipment: $280
Total Schedule C deductions: $31,774. Net profit: $13,226. SE tax: ~$1,869. After the $4,800 self-employed health insurance adjustment and the $16,100 standard deduction, income tax: $0. Total federal tax: roughly $1,869, about a 4.2% effective rate on $45,000 gross.
Automate your bookkeeping
Wave offers free accounting software with invoicing, receipt scanning, and financial reports, built for small sellers.
Beyond general accounting software, online sellers benefit from tools that understand marketplace settlement reports. The FBA profit calculator at Bag Engine helps you quickly see how your deductions flow through to actual take-home profit, useful before committing to a new product or pricing change.
What a seller may claim, must disclose, and owes in tax is set by published federal rules rather than by any marketplace's seller handbook, and the sources below are the primary ones. They are linked so a reader can check a claim here without taking this page's word for it.
USPTO trademarks governs brand registration, which decides who may enforce a listing takedown.
Census retail trade data publishes the official retail and ecommerce sales figures market-size claims are checked against.
This page describes tools and the rules that apply to using them. A seller's own structure, state and marketplace agreements decide what applies to them.
Frequently Asked Questions
What is the biggest tax deduction for online sellers?
Cost of goods sold (COGS) is typically the largest deduction for online sellers, often 30-60% of gross revenue. COGS includes the purchase price of items sold, materials, and the cost to produce or acquire inventory. It's reported on Schedule C, Part III.
Can online sellers deduct platform fees?
Yes. All platform fees are 100% deductible business expenses: Etsy transaction fees, Amazon referral and FBA fees, eBay final value fees, Shopify subscription and processing fees, and PayPal/Stripe payment processing fees. Report them as expenses on Schedule C.
Can online sellers deduct shipping costs?
Yes. Shipping costs paid by the seller, postage, carrier fees, packaging materials, thermal label printers, ShipStation subscriptions, are all deductible business expenses. If you charge customers for shipping and they pay it, only the portion you actually paid is deductible.