Tax guides · For Etsy sellers, makers & craft businesses

Etsy seller write-offs: what you can actually deduct

The moment your shop earns real money, the IRS sees a business — which means the yarn, the shipping tape, the listing fees, and a slice of your craft room are all working for you at tax time. Here's the full map, organized by where each expense lands on Schedule C.

Schedule C · Part IIIMaterials — but they work differently than you think

Beads, fabric, clay, wood, glaze: these are cost of goods sold, not a simple expense. In plain terms, you deduct the materials that went into items you sold this year; supplies still sitting in inventory carry into next year. The practical consequence: you need purchase records for every materials run — the craft store receipt from March matters in April of next year.

Schedule C · Line 10Every fee Etsy charges you

Listing fees — every $0.20, deductible.
Transaction fees — Etsy's percentage of each sale.
Payment processing fees — the card-processing cut.
Etsy Ads / Offsite Ads charges — deductible (advertising, Line 8).

Important: your 1099-K reports gross sales — before fees. If you don't deduct the fees, you pay tax on money Etsy kept. Download your Etsy payment account CSV and keep it.

Schedule C · Line 27a & 22Shipping and packaging

Postage, mailers, boxes, tissue paper, washi tape, thank-you cards, the label printer, and the label rolls. If a buyer paid you for shipping, that payment is income — and what you actually spent on postage is the matching deduction.

Form 8829 / SimplifiedThe home studio

If a space in your home is used regularly and exclusively for the business — a craft room, a dedicated corner, a garage workbench — you can claim the home office deduction. The simplified method is a flat rate per square foot (up to 300 sq ft) and requires almost no recordkeeping. "Exclusively" is the operative word: the dining table you also eat on doesn't qualify.

Lines 8, 18, 27aThe quiet deductions makers skip

Photography gear — lightbox, backdrops, tripod, and the prop that makes your mugs look expensive.
Software — Canva, Adobe, accounting tools, your website/domain.
Craft fair costs — booth fees, table, tent, banner, square reader.
Mileage to the post office, supply runs, and fairs — at the IRS standard rate (check the current year's figure at irs.gov).
Education — the pottery course or marketing workshop that improves your existing business.
Samples and failed batches — materials consumed in product development count.

Hobby vs. business: the IRS only allows these deductions if you run the shop to make a profit. Keep records like a business — separate tracking, receipts, a profit motive you can show — and you are one.

The real problemA year of supply runs is 200 receipts

Etsy's fees are at least in a tidy CSV. The Michaels run, the post office line, the fabric remnant from a market stall — those live on paper that fades and in card statements that say nothing. Every one you can't substantiate is a deduction you donate back to the IRS.

Snap it. Deduct it. Done.

stub. scans any receipt in seconds, finds the deduction, and files it to the right Schedule C line. Built for makers. 15 free scans a month.

Download for iPhone Get it on Android

More guides: Gig driver deductions · The freelancer deduction checklist

This guide is general education, not tax advice. Tax rules change and individual situations differ — confirm current rates and rules at irs.gov or with a tax professional before filing.