53 Tax Deductions for eCommerce Businesses in 2025

Understanding tax deductions doesn't have to be as painful as stepping on a LEGO. 

In fact, if you're running your business properly, you're probably already doing most of the things you need to do. 

You just need to know how to document them correctly.

Think of this guide as your friend who's been through it all and is sitting down with you to explain how this stuff actually works. 

No accountant-speak, no TikTok "tax hacks," just straight talk about:

• What the heck a tax deduction actually is
• Which ones matter for eCommerce sellers
• How to track them without losing your mind

Ready to make tax season suck less? Let's dive in.

Ps. don’t treat this blog post as tax advice. Our goal is to give you an overview. Different states = different rules. Always consult with a tax expert.

What is a Tax Deduction Anyway?

Imagine you sell products online and make $100,000 in revenue this year. 

Without any deductions, you'd pay taxes on that full $100,000. But that's not really fair, because you had to spend money to make that money, right?

A tax deduction reduces your taxable income. It's that simple. 

Here's how it works:

Revenue: $100,000 

Deductions:

• Cost of products: $60,000
• Shipping costs: $10,000
• Software subscriptions: $5,000
• Marketing expenses: $10,000

Taxable Income: $15,000

So you only pay taxes on that $15,000, not the full $100,000.

These are ordinary expenses in the day-to-day operation of your business.

If you're keeping good, clean books and records, you're catching most of these.

What Taxes Can You Deduct?

When we talk about "tax deductions" for ecommerce, we're mainly talking about reducing your income tax. 

The other types of taxes matter because they can become income tax deductions themselves.

Here's what you really need to know:

1. Income Tax Deductions (This is what most people mean by "tax deductions")

• These reduce your taxable income for federal and state income taxes
• All those business expenses like shipping, software, marketing etc.
• This is where most of your tax planning focus should be

2. Sales Tax (Can't be "deducted" but matters in two ways)

• You can't deduct what you collect from customers
• BUT you can deduct sales tax you pay on business purchases as a business expense

3. Payroll Tax

• Fixed rates - no deductions apply
• BUT the wages themselves are deductible from your income tax

4. Property Tax

• Can be deducted as a business expense from your income tax
• Rate itself can't be reduced through deductions

Here's a real-world example: If you spend $1,000 on shipping supplies:

• It's deductible from your income taxes
• Doesn't affect how much sales tax you collect
• Doesn't reduce your payroll tax obligations

List of Tax Deductions

The Golden Rule of Business Deductions: If it's ordinary and necessary for your business, and you can prove you paid for it, it's probably deductible.

Employee & Contractor Related Deductions

Whether you've got a team of VAs in the Philippines or a warehouse full of packers in Portland, here's what you can write off:

1. Salaries and Benefits

Think you can only deduct basic wages? Think again. Pretty much everything you spend on employees can be deducted, including:

• Regular wages (duh, but had to mention it)
• That sweet health insurance package you're offering
• The 401(k) matching you set up to keep your rock stars around
• Worker's comp insurance (which, by the way, is required in most states)

Pro Tip: Keep those payroll records squeaky clean. The IRS loves to peek at how you're handling employee expenses, especially if you've got a mix of full-time and part-time workers.

2. Independent Contractors and Subcontractors

Got freelancers? Virtual assistants? That guy who fixes your product photos? Keep track of every penny because it's all deductible. Just remember:

• You need 1099s for anyone you pay $600+ per year
• Those Fiverr and Upwork fees? Yep, those count too
• Even one-off project payments can be deducted

3. Commissions

If you're paying commissions to:

• Sales teams
• Affiliate marketers
• Marketplace referrals These are all 100% deductible. Just make sure you've got the documentation to back it up.

4. Payroll Expenses

This is more than just the checks you write. You can deduct:

• Payroll service fees
• Employer portion of Social Security and Medicare
• State unemployment insurance
• Any other mandatory employment taxes

We've seen too many ecommerce owners mess this up by mixing personal and business payroll. Keep them separate, people! Your future self (and your accountant) will thank you.

Office & Workspace Deductions

Whether you're running your empire from your garage or a fancy downtown space, here's what you can deduct:

5. Home Office Expenses

This one's a goldmine if you do it right (and a landmine if you do it wrong). Here's the deal:

The IRS's "exclusive use" rule is no joke. That corner of your living room where you sometimes pack orders while watching Netflix? Doesn't count. 

But that spare bedroom you've turned into your shipping station? Now we're talking.

You can deduct a portion of:

• Rent or mortgage interest
• Property taxes (yes, even if you own the home)
• Home insurance
• Utilities (based on the percentage of your home used for business)

The magic formula? Measure your office space and divide it by your total home square footage. That's the percentage you can deduct.

6. Utilities

Whether you're home-based or in a commercial space, these count:

• Electricity (gotta keep those ring lights running)
• Heat/AC (melted inventory is not a good look)
• Water (yes, even the water bill)
• Garbage service (all those Amazon boxes have to go somewhere)

7. Office Improvements and Repairs

Made your workspace more functional? That's deductible:

• Built shelving for inventory? ✓
• Added better lighting for product photos? ✓
• Fixed that wonky door that kept hitting your packages? ✓

8. Coworking Space Memberships

Got tired of your kids interrupting your Zoom calls? Your membership fees are most likely deductible.

9. Commercial Rent

If you've graduated to a "real" office or warehouse:

• Monthly rent
• Security deposits
• Property insurance
• Common area maintenance fees

10. Office Equipment and Supplies

The fun stuff! We're talking:

• That standing desk you bought (your back says thanks)
• The ergonomic chair your chiropractor recommended
• Every single paper clip and sticky note
• Printer ink (which somehow costs more than the printer)

The biggest mistake I see with office deductions?

People trying to deduct their entire home expenses because they "sometimes work from the kitchen table." Don't be that person. 

Be honest, be reasonable, and keep good records.

Take photos of your workspace setup, especially if it's in your home. If the IRS ever comes knocking, you'll want to prove that yes, this really is a dedicated business space.

Technology & Communications Deductions

11. Website Expenses

Your storefront in the digital world is 100% deductible:

• Shopify fees (or whatever platform you're using)
• Domain registration (even if you're hoarding domains for future projects)
• Web hosting
• SSL certificates
• Theme purchases and customizations

Reality Check: Those "premium" Shopify apps you signed up for and forgot about? They're deductible too. But maybe audit your subscriptions while you're at it?

12. Internet Services

Yes, you can deduct your internet! But let's be smart about this:

• Home internet? Deduct the business-use percentage
• Dedicated business line? That's 100% deductible
• Mobile hotspots for backup? Yep, those too

13. Telephone and Communications

All those ways you stay connected:

• Business cell phone (or portion of personal if you use it for business)
• VoIP services like RingCentral or Grasshopper
• Zoom Premium (because we all learned free isn't enough)
• Slack subscriptions
• International calling plans for supplier calls

14. Software Subscriptions

If it helps you run your business, it's probably deductible:

• Accounting software (QuickBooks, Xero, Netsuite)
• Inventory management tools
• CRM systems
• Design tools (Adobe, Canva Pro)
• Project management (Asana, Monday, etc.)

15. Online Services and Tools

All those digital tools that keep you sane:

• Cloud storage (Google Drive, Dropbox)
• Email marketing platforms
• Social media scheduling tools
• Analytics tools
• Security software

Pro Tip: Create a spreadsheet of all your tech subscriptions with renewal dates. It's scary how many people are paying for tools they forgot about, but at least they're deductible!

Common Mistakes to Avoid:

• Don't try to deduct your entire home internet if your kids are streaming Netflix all day
• Remember to prorate annual subscriptions across tax years
• Keep evidence of business use (screenshots, reports, etc.)

Marketing & Sales Deductions

Let's break down all the ways you can write off your efforts to get noticed:

16. Advertising and Promotion

Every penny you spend getting eyeballs on your products from various marketing channels:

• Social media ads (Facebook, Instagram, TikTok)
• Google Ads (even the ones that flopped)
• Influencer payments
• Email marketing costs
• Banner ads
• Sponsored content

Real Talk: Those "failed" ad campaigns? Still 100% deductible. The IRS doesn't care if your marketing worked, just that you were legitimately trying to promote your business.

17. Marketing Tools and Services

All the behind-the-scenes stuff that makes your marketing happen:

• Social media management tools
• Email marketing platforms
• SEO tools
• Analytics software
• Contest and giveaway platforms

18. Photography and Videography Equipment

Because phone pics don't always cut it:

• Cameras
• Lighting equipment
• Backdrops
• Props for product shots
• Video editing software

19. Merchant Processing Fees

Those painful but necessary transaction costs:

• Credit card processing fees
• PayPal fees
• Stripe fees
• Currency conversion charges
• Chargeback fees (ugh, but yes, deductible)

20. Seller Platform Fees

All those marketplace costs:

• Amazon FBA fees
• eBay fees
• Etsy charges
• Walmart Marketplace fees
• Any other platform where you sell

21. Business Gifts

Yes, you can deduct those thank-you gifts you send to your best customers, BUT:

• Limited to $25 per person per year (thanks, IRS)
• Must be actually business-related
• Need to track who got what and when

Those fancy kraft paper mailers with your logo? They count as marketing materials, not gifts. Same with product samples. Only "actual" gifts fall under the $25 limit.

Shipping & Inventory Deductions

These deductions are usually your biggest write-offs, so pay attention because missing these could literally cost you thousands.

22. Packaging and Shipping Supplies

Everything that gets your product safely to your customer:

• Boxes (even those "free" USPS ones - you paid for them in your rates)
• Bubble wrap and air pillows
• Packing tape
• Labels and label printers
• Custom packaging with your logo
• Poly mailers
• Thank you cards
• Inserts and promotional materials

Hot Tip: Those fancy custom boxes with your logo? They count as BOTH packaging AND marketing expenses. Double win! Just don't try to deduct them twice.

23. Shipping Costs

All the ways you get stuff from Point A to Point B:

• Postage and carrier fees
• Third-party shipping services
• Insurance on shipments
• Tracking upgrades
• International shipping fees
• Return shipping costs (yes, even those painful free returns)

24. Cost of Goods Sold (COGS)

This is the big one, folks. COGS includes:

• Raw materials
• Direct labor costs
• Manufacturing costs
• Product costs from suppliers
• Import duties and taxes
• Quality control costs
• Product photography costs (when part of production)

25. Storage

Keeping your inventory safe and sound:

• Warehouse rent
• Storage unit fees
• Climate control costs
• Security systems
• Shelf and rack systems
• Inventory management software
• 3PL (Third-Party Logistics) fees

A lot of sellers mess up COGS by not including ALL their costs. That cheap product from Alibaba? Don't forget to add in shipping, customs, and storage before you calculate your actual cost.

Professional Services Deductions

You can't be an expert at everything, and the IRS actually expects you to get help. Here's how to deduct all those brain-for-hire expenses:

26. Legal Fees

Any time you talk to a lawyer about your business, cha-ching - it's deductible:

• Trademark registrations
• Contract reviews
• LLC formation
• Terms of service updates
• Dispute resolution
• Patent applications
• Compliance reviews

Keep your legal invoices detailed. "Legal services" isn't good enough for the IRS. 

Make sure your lawyer breaks down what they did, even if it's just "2 hours trademark consultation."

27. Accounting Services

Everything money-related (and yes, this includes what you're paying for tax help):

• Bookkeeper fees
• Tax preparation
• CPA consultations
• Payroll service fees
• Financial statement preparation
• Tax planning sessions

28. Business Consulting

Those experts who help you level up:

• Business coaches
• Social media consultants
• Operations advisors
• Supply chain specialists
• Marketing strategists
• Amazon/eBay optimization experts

29. Professional Memberships

All those groups that keep you in the loop:

• Industry associations
• Chamber of Commerce dues
• Professional organizations
• Online seller groups with paid memberships
• Trade group fees

Professional services are one of the easiest deductions to take but also one of the easiest to mess up if you don't have proper documentation.

The key is being able to prove these services were:

1. Actually business-related
2. Actually performed
3. Actually paid for

Financial & Insurance Deductions

This section might make your eyes glaze over, but stick with me - these deductions are like finding money in your coat pocket, just way more legal.

30. Business Insurance

Everything that keeps you protected:

• General liability insurance
• Professional liability insurance
• Product liability coverage
• Cyber insurance
• Business interruption insurance
• Commercial property insurance
• Inventory insurance

31. Business Interest

All that money you're paying to borrow money:

• Business credit card interest
• Business loan interest
• Line of credit interest
• Equipment financing interest
• Inventory financing costs
• PayPal/Square working capital repayments

32. Bank Fees

Those annoying but necessary banking costs:

• Monthly maintenance fees
• Wire transfer fees
• ATM fees (for business cards)
• Foreign transaction fees
• Overdraft fees (hey, it happens)
• Online banking fees

33. Bad Debts

When people or businesses don't pay you:

• Uncollectible invoices
• Customer chargebacks you couldn't recover
• Bounced check fees
• Unpaid accounts receivable

The IRS loves to scrutinize bad debt deductions. Make sure you can prove you tried to collect and that the debt was actually business-related.

34. Payment Processing Fees

All those little bites taken out of your sales:

• Credit card processing fees
• PayPal fees
• Stripe fees
• Square fees
• ACH processing fees
• Currency conversion fees

Here's the thing about financial deductions - they're usually small individually but add up to a lot over the year.

That $30 monthly bank fee? That's $360 annually. The 2.9% + $0.30 per transaction from PayPal? Could be thousands.

Travel & Transportation Deductions

Whether you're flying to trade shows or driving to your storage unit, if it's for business, it's probably deductible. Let's break it down:

35. Business Travel

All those trips you take to grow your empire:

Airfare

• Flights to trade shows
• Trips to meet suppliers
• Conferences and conventions
• Training events
• Business meetings

Hotels

• Room charges
• Resort fees (if it's a business conference there)
• Internet charges
• Business center fees
• Parking at hotels

Ground Transportation

• Uber/Lyft rides
• Taxi fares
• Airport shuttles
• Train tickets
• Car rentals

Pro Tip: That extra day you stayed to "explore the city"? Not deductible. But if you had business meetings on Friday and Monday, the weekend in between usually counts!

36. Auto Expenses

Got a car you use for business? You've got two options:

Option 1: Standard Mileage Deduction

• Current rate: [X] cents per mile (changes annually)
• Track your business miles
• Super simple but might give you less money back

Option 2: Actual Expenses

• Vehicle maintenance
• Gas
• Car insurance
• Repairs
• Registration fees
• Car loan interest
• Depreciation
• Parking and tolls

The IRS loves to audit vehicle expenses. If you're claiming car deductions, your documentation needs to be tighter than your gas cap.

The key to travel deductions isn't just keeping receipts - it's documenting the business purpose. The IRS doesn't care that you spent $500 on a hotel; they care about WHY you spent it.

Education & Development Deductions

Keeping up isn't just smart - it's deductible. Here's how to write off getting smarter:

37. Professional Education

Everything that teaches you to business better:

• Online courses
• Digital marketing classes
• Business management programs
• Platform-specific training (like Amazon FBA courses)
• SEO workshops
• Financial management classes

That $2,000 dropshipping course you bought? Deductible. The yoga class you took to "reduce business stress"? Nice try, but no.

38. Training Programs

Skills-based learning for you and your team:

• Software training
• Safety certifications
• Customer service workshops
• Sales training
• Inventory management courses
• Photography classes (if you shoot your own products)

39. Trade Publications

Staying in the know:

• Industry magazines
• Digital subscriptions
• Market research reports
• Trend forecasting services
• Newsletter subscriptions
• Trade journals

40. Business Books

Your business library:

• Business strategy books
• Industry guides
• Technical manuals
• Digital ebooks
• Audiobooks (yes, that Audible subscription can be deductible!)
• Reference materials

41. Conference Fees

Learning and networking investments:

• Virtual conference tickets
• In-person event registration
• Workshop fees
• Mastermind group dues
• Industry meetup costs
• Online summit access

Save those conference agendas and workshop syllabi. They prove the educational value to the IRS better than just a receipt.

Remember: Education deductions are about maintaining or improving your current business skills. If you can draw a clear line between the learning and your business revenue, you're probably good to go.

Licenses & Legal Requirements

Nobody gets excited about licenses and permits, but they're 100% deductible and 100% necessary unless you enjoy surprise visits from angry government officials.

42. Business Licenses

All those pieces of paper that make you legit:

• General business license
• Seller's permits
• Home-based business permits
• DBA (Doing Business As) registration
• State sales tax licenses
• County/city operating licenses

43. Permits

The special permissions you need:

• Health department permits
• Environmental permits
• Zoning permits
• Fire safety permits
• Building permits (for your workspace)
• Special use permits

44. Professional Certifications

Proof you know what you're doing:

• Industry certifications
• Safety certifications
• Professional licenses
• Continuing education credits
• Required annual renewals
• Testing fees

45. Regulatory Compliance Costs

Staying on the right side of the law:

• Product testing
• Safety compliance
• FDA registrations
• CPSC certifications
• Environmental compliance
• ADA compliance for websites
• Privacy policy updates
• Terms of service maintenance

Set calendar reminders for renewal dates. Late renewal fees aren't just expensive - they're usually not deductible because they're considered penalties.

Reality Check: "I didn't know I needed that license" has never worked as an excuse with any government agency ever. But hey, at least the cost of finding out what you need is deductible!

Special Deductions (The Hidden Tax Savings Most Sellers Miss)

These aren't your everyday deductions - they're more like tax ninjas that can save you serious money if you know how to use them. Let's dive into the special stuff:

46. Qualified Business Income (QBI) Deduction

This is the big one, folks - potentially up to 20% off your business income:

How it works:

• Take your net business income
• Subtract any capital gains
• Apply the 20% deduction
• Watch your tax bill shrink

QBI isn't just another deduction - it's like getting a 20% off coupon for your taxes. But like all good coupons, restrictions apply.

Key QBI Rules:

• Must have "qualified" business income
• Income limits apply
• Some service businesses face restrictions
• Requires specific documentation
• Can't be wages you paid yourself

47. Startup Costs

Starting a new business this year? These costs are special:

• First $5,000 can be deducted immediately
• Remaining costs amortized over 15 years
• Includes research expenses
• Planning costs
• Training expenses
• Marketing research

48. Charitable Contributions

Yes, your business can be generous AND save on taxes:

• Product donations
• Cash contributions
• Sponsorships of charitable events
• In-kind services (track those hours!)
• Equipment donations

Pro Tip: That inventory you can't sell? Donate it! You can often deduct the full retail value, which beats liquidating it for pennies.

49. Business Meals (50% Deductible)

The IRS will let you deduct half your business lunch expenses:

• Client meetings
• Employee meals during travel
• Team lunches
• Conference meals
• Business discussion meals

Rules for Meal Deductions:

• Must be business-related
• Can't be "lavish or extravagant"
• Need to document who, what, where, when, why
• Keep those itemized receipts!

That $300 wine with dinner? The IRS might consider that "lavish." Stick to reasonable expenses you'd be comfortable explaining to an auditor.

Remember: Special deductions often require special documentation. The bigger the benefit, the more proof the IRS wants to see.

Other Business Expenses

Just when you thought we covered everything, here's the catch-all category for those "but wait, there's more!" business expenses. Don't skip these - they add up fast!

50. Trade Show Expenses

Everything it takes to show up and show off:

• Booth fees
• Display materials
• Sample products
• Promotional items
• Setup and breakdown costs
• Utility hookups at shows
• Rental furniture
• Lead capture systems

Pro Tip: Take photos of your trade show setup. They prove you were actually there doing business (plus, they're great for insurance if anything gets damaged).

51. Business Association Dues

All those groups that keep you connected:

• Industry associations
• Local business groups
• Professional networks
• Online seller communities
• Chamber of Commerce
• Trade groups
• Networking organizations

52. Research and Development

Improving your products or processes:

• Product testing
• Market research
• Focus groups
• Sample development
• Prototype costs
• Testing materials
• Software development
• New product research

53. Workspace Safety Equipment

Keeping everyone safe and healthy:

• First aid supplies
• Fire extinguishers
• Safety signs
• Protective equipment
• Emergency lighting
• Security systems
• Air purifiers
• Ergonomic equipment

Just because these expenses don't fit neatly into other categories doesn't make them any less deductible. The key is documentation, documentation, documentation!

How to Actually Claim These Deductions

Having deductions is great, but knowing how to claim them properly is what gets you the money back. Here's your step-by-step guide:

Choose Your Filing Method

You've got two main options:

1. Schedule C (Sole Proprietors/Single-Member LLCs):

• Part of your personal tax return
• Lists all income and expenses
• Relatively straightforward
• Most online sellers start here

2. Business Tax Return (Corporations/Partnerships):

• Separate from personal taxes
• More complex but more options
• Usually requires a tax pro
• Necessary for larger operations

Pro Tip: If you're making over $40k in profit, talk to a tax pro about whether you should switch from Schedule C to an S-Corp. The tax savings can be huge.

Organizing Your Deductions

The "Never Fail" System:

1. Sort expenses into clear categories (use the ones we covered)
2. Keep running totals for each category
3. Match every expense to a receipt
4. Note the business purpose for anything unusual
5. Keep a separate spreadsheet for big purchases (over $500)

Documentation Requirements

Must-Haves for Every Deduction:

• Receipt or proof of payment
• Date of purchase
• Amount paid
• What it was for
• Business purpose
• Who was paid

The IRS doesn't accept "trust me, it was for business" as documentation. Even if you're 100% honest, without proof, the deduction is 100% gone.

Timing Matters

When to Claim What:

• Regular expenses: Deduct in the year you pay them
• Large equipment: May need to depreciate over time
• Prepaid expenses: Usually deduct when you use them, not when you pay
• Inventory: Deduct when you sell it, not when you buy it

Common Pitfalls to Avoid

Don't Make These Mistakes:

1. Mixing personal and business expenses
2. Forgetting to track cash purchases
3. Waiting until tax time to organize
4. Missing receipts for large purchases
5. Not having a backup system for records

Pro Tips for Maximum Success:

• Keep Business and Personal Separate (For Real Though)
• Use accounting software that plays nice with eCommerce (QuickBooks, Xero, etc.)
• Use a Sales Tracking Integration (A2X)
• Use a receipt management system (Dext, Settle)
• Keep digital and physical backups

The Best Tax Deductions Are the Ones You Can Prove

Better to skip a deduction you can't document than claim one you can't prove.

Remember:

• Good records = Good deductions
• Bad records = No deductions
• No records = Potential audit

Working with Professionals (Because Sometimes You Need a Pro)

At some point, you'll probably need professional help with your taxes. Here's how to know when, and how to make the most of it.

When to Bring in Help

Time to Call a Pro When:

• Your revenue hits $40k+ annually
• You're considering changing business structures
• You have employees or contractors
• You sell in multiple states
• You're being audited (obviously!)
• Your inventory tracking is complex
• You're expanding internationally

If you're spending more than 5 hours a week on bookkeeping and taxes, it's probably time to get help.

Your time is worth more selling products than sorting receipts.

How to Make the Most of Professional Advice

Getting Your Money's Worth:

• Come prepared with specific questions
• Keep a running list of tax concerns
• Ask about tax planning, not just tax filing
• Request explanations you understand
• Get advice in writing
• Schedule regular check-ins
• Actually follow their advice

The best time to talk taxes isn't April 14th. Schedule quarterly reviews with your tax pro to plan ahead and avoid surprises.

Final Wisdom: Your tax pro should be like a business partner who happens to be really good at taxes. They should help you grow, not just file forms.

This isn't just about surviving tax season - it's about building a sustainable, profitable business that just happens to be really good at handling its taxes!