Running a handmade or vintage business is rewarding, but tax season can feel overwhelming—especially if you’re not tracking your expenses. The good news? Many of the costs associated with running your Etsy shop or other online business are tax-deductible, meaning you can lower your taxable income and keep more of your hard-earned money. The key is keeping all your receipts and knowing what qualifies as a business expense. Let’s break down the top tax deductions sellers should track.
📌 Note: This article discusses tax forms related to US taxes only. If you’re outside the US, consult a local tax professional for guidance. eRank does not provide legal or tax advice—always check with a tax professional for personalized recommendations.
What Can You Deduct?
By tracking and claiming allowable business deductions, you can lower your taxable income and keep more of your hard-earned profits. From materials and shipping supplies to marketing and home office costs, here are some key expenses you may be able to deduct for your business.
Materials & Supplies
Everything you purchase to create your handmade products can be deducted from your taxable income. This includes:
✅ Fabric, yarn, beads, wood, paint, clay, or any raw materials
✅ Tools and equipment used for crafting (scissors, molds, brushes, knitting needles)
✅ Packaging materials like bubble wrap, tissue paper, and custom boxes
💡 Tip: If you also use tools or materials for personal projects, be sure to only deduct what is used for your business.
Shipping Costs
If you ship products to customers, you can deduct:
✅ Postage fees (USPS, FedEx, UPS)
✅ Envelopes, mailers, labels, and tape
✅ A shipping scale or postage printer
💡 eRank Pro Tip: Use eRank’s Keyword Tool to find trending product categories and keywords before launching a new item. This can help you predict shipping costs by analyzing similar products on Etsy.
Home Office & Workspace Expenses
Do you run your business from home? You may be able to deduct part of your home expenses, including:
✅ A percentage of your rent or mortgage (if you have a dedicated home office)
✅ Utilities like electricity and internet (based on business use)
✅ Office furniture such as desks, chairs, and shelving
💡 Important: The space must be exclusively used for business to qualify. A multipurpose kitchen table doesn’t count. Read Five Home Office Expenses for Etsy Sellers for more information.
Marketing & Advertising
Promoting your handmade business also qualifies as a tax deduction. Eligible expenses include:
✅ Etsy ads, Facebook ads, and Instagram promotions
✅ Business cards, branded stickers, and flyers
✅ Website hosting fees (Shopify, domain names)
💡 Boost Visibility: eRank’s Trend Buzz can help you identify trending keywords to use in ads, increasing your chances of reaching potential customers.
Software & Subscriptions
Any software you use to run your business may be deductible, such as:
✅ eRank Pro or other SEO research tools
✅ Accounting software like QuickBooks or Wave
✅ Design programs like Canva or Adobe Illustrator
Travel & Mileage
If you drive to craft fairs, the post office, or supply stores, you can deduct:
✅ Mileage (use the 2024 IRS business mileage rate to calculate)
✅ Parking fees and tolls
✅ Hotel stays and meals (if attending business-related events)
💡Additional Info: Check out these eRank blog articles for more information on travel and mileage:
2024 New Mileage Rate for US Taxes
The New 2025 IRS Business Mileage Rate
Travel Expenses: What Can You Deduct?
Professional Services
Hiring help? You can deduct:
✅ Accountant or tax preparer fees
✅ Legal fees for contracts or trademarks
✅ Freelancers for photography, branding, or listing descriptions
How Should You Keep Receipts?
The IRS requires you to keep records of all deductible expenses, but that doesn’t mean you need stacks of paper receipts cluttering your workspace. The IRS allows digital copies of receipts, meaning you can scan, take a picture, or save an electronic copy as proof of your expenses.
Best Ways to Keep Receipts:
📌 Use an expense-tracking app: Many accounting software programs let you scan and organize receipts digitally within the program.
📌 Create a dedicated folder on your computer or cloud storage: Save receipt images in labeled folders (e.g., “2025 Business Expenses”).
📌 Snap a picture and email it to yourself: Set up a separate email folder for easy access.
Keeping clear, organized records of your receipts ensures you have everything you need if you’re ever audited and makes tax preparation much smoother.
Stay Organized & Save Money
Keeping good records of these expenses throughout the year makes tax time much easier. Save all receipts—whether digital or paper—and consider using bookkeeping software to track everything.
Want more business tips? Stay ahead of the game by using eRank’s tools to optimize your listings, research trends, and grow your e-commerce business with confidence!
By tracking your expenses and taking advantage of tax deductions, you’ll keep more of your earnings and set your business up for financial success.
