Many shop owners ask: can you deduct Etsy fees on their taxes? If you are an Etsy seller, you know the feeling: you sell an item for $50, but after listing fees, transaction fees, payment processing, and shipping, what lands in your bank account looks very different.
The good news? Almost every single fee Etsy charges you is 100% tax-deductible.
As a business owner (Sole Proprietor), the IRS considers these fees as “ordinary and necessary” costs of doing business. This means you subtract them from your gross income, lowering your taxable profit and, ultimately, your tax bill.
In this guide, we break down exactly which fees are deductible, the current rates for 2024-2025, and—most importantly—where to put them on your Schedule C (Form 1040).
The Golden Rule for Deducting Etsy Fees: COGS vs. OPEX
Before we list the fees, you need to understand the two buckets the IRS uses to classify your spending. This distinction is crucial for an audit-proof return.
- COGS (Cost of Goods Sold): These are direct costs to create your product (materials, raw fabrics, beads, direct labor).
- Operating Expenses (OPEX): These are the costs to sell your product and run the business. Etsy Fees fall into this category.
Pro Tip: Never mix your Etsy Fees into your COGS. Fees are operational costs. keeping them separate helps you track your true profit margins accurately.
The Ultimate Etsy Fees Deduction Table (2025)
Here is the quick-reference chart for tax time.
| Fee Type | Current Cost | Tax Deductible? | Schedule C Line |
|---|---|---|---|
| Listing Fee | $0.20 per item | ✅ Yes | Line 10 or 8 |
| Transaction Fee | 6.5% of total | ✅ Yes | Line 10 |
| Payment Processing | 3% + $0.25 | ✅ Yes | Line 10 |
| Offsite Ads | 12% or 15% | ✅ Yes | Line 8 |
| Etsy Ads | Your Budget | ✅ Yes | Line 8 |
| Shipping Labels | Varies | ✅ Yes | Line 27a or 18 |
| Etsy Plus | $10/month | ✅ Yes | Line 27a |
Deep Dive: Which Fees Can You Write Off?
Let’s examine exactly how you can deduct Etsy fees for each specific charge on your monthly statement. Let’s look at the specific deductions you will see on your monthly statement.
1. Listing Fees ($0.20) Every time you list an item or renew it after a sale, Etsy charges $0.20. While small, high-volume shops can spend hundreds here.
- Tax Tip: Deduct the full amount paid during the tax year, even if the item hasn’t sold yet.
2. Transaction Fees (6.5%) Etsy takes 6.5% of the total sale price (including the shipping you charge the customer). This is a pure commission fee.
- Where to file: Usually reported on Line 10 (Commissions and fees) of Schedule C.
3. Payment Processing Fees If you use Etsy Payments, you are charged a processing fee (typically 3% + $0.25 in the US) to handle the credit card transaction.
- Important: This is separate from the transaction fee. Make sure you are tracking both.
4. Advertising Fees (On-site & Offsite) Marketing is a massive deduction.
- Etsy Ads: The budget you set to promote listings within Etsy.
- Offsite Ads: The mandatory fee (12% for shops over $10k sales, 15% for others) when Etsy brings you a buyer from Google or Facebook.
- Where to file: These go strictly on Line 8 (Advertising).
5. Shipping Labels vs. Transaction Fees This confuses many sellers.
- Shipping Transaction Fee: The 6.5% Etsy charges on the shipping price you set. (Deductible as a Fee).
- Shipping Label Cost: The actual money you pay USPS/FedEx/UPS to ship the box. (Deductible as Shipping Expense).
What is NOT Deductible?
Be careful not to deduct personal expenses that happen on Etsy.
- Personal Purchases: If you buy a gift for your mother on Etsy using your business account funds, that is not a business expense. It is a personal “Owner’s Draw.”
- Sales Tax Remitted by Etsy: Etsy automatically collects and pays sales tax for most states. Since this money never actually “touches” your bank account as income, you generally do not claim it as an expense (because you shouldn’t claim it as revenue). Always check your 1099-K to see if gross numbers include this tax.
How to Find Your Total Fees for Taxes
Don’t guess! Etsy generates a report for this.
- Go to Shop Manager > Finances > Monthly Statements.
- Select the entire year (e.g., 2024).
- Download the CSV file.
- Sum up the columns for “Fees,” “Marketing,” and “Shipping Labels.”
Final Thoughts
Yes, Etsy fees are annoying, but they reduce your taxable income dollar-for-dollar. By categorizing them correctly on your Schedule C, you ensure you aren’t paying the IRS more than you owe.
For more details, check our guide on how to deduct Etsy fees correctly.
Disclaimer: I am an educational resource, not a CPA. Tax laws vary by state and individual situation. Always consult with a qualified tax professional before filing.