Knowing exactly what ecommerce tax deductions you can take for your ecommerce business can significantly lower your taxable income, which means you’ll pay less when you write your check to the government this year.
While you may know of some of the accepted deductions, chances are there are some you’re likely to miss. So, we’ve put a list together of the 12 ecommerce tax deductions that you don’t want to overlook.
#1 – Home Office
If you work from home, you may be able to take a home office deduction. That means that you can deduct a portion of your rent or mortgage – but there are some stipulations. Your home office must be used exclusively and regularly for your business. If you use your dining room, a desk in your living room, or work from your coffee table, those won’t qualify because they are also for personal use.
Furniture like desks, chairs, and filing cabinets that are specifically for your home office are completely deductible. If you buy computers and computer accessories that are only for office, then you can deduct the entire purchase. If you use them for mixed purposes, you can write off the percentage that you use them for your business.
If you take the home office deduction, you may also be able to deduct a portion of your utilities, business insurance, and rental insurance premiums.
#2 – Advertising
You may be able to find deductions in the dollars you spend on marketing and advertising for your online business. If you advertise on social media using Facebook Ads or Google Ads, or you do print advertising, you may be able to deduct those costs. Additionally, you can deduct costs for your email provider and any services that you use to schedule social media advertising posts.
#3 – Website Expenses
You can deduct everything that is related to your website. What you pay for your domain names, hosting costs, plug-ins, stock photography, subscriptions to ecommerce website services like Shopify, or even fees for Amazon FBA and eBay may all be deductible.
#4 – Cell Phone
You can write off a portion of your cell phone charges based on the percentage that you use it for business. Ecommerce business owners typically deduct 50-70 percent of their cell phone bill.
#5 – Internet
The deduction for your internet costs is the same as your cell phone deduction – you can write off a portion based on how much you use it for your online business.
#6 – Merchant Processing Fees
If you use a credit card processor like PayPal, Stripe, or Square, you can deduct the fees that they charge you.
#7 – Office Supplies and Shipping Costs
These are the supplies that you use to run your business on a daily basis. Most are inexpensive items, but they do add up. Consider things like notebooks, printer paper, ink, file folders, envelopes, and postage. You can also deduct charges for shipping and packaging materials and other costs of the fulfillment process that you use for getting your product inventory out to your customers.
#8 – Software
The software that you use for your business is deductible. For example, if you sell on a marketplace like Amazon and use an inventory management system, that is deductible. You are also able to deduct anything that you spend for apps and subscription service software that are related to your business.
#9 – Photo and Video Equipment
Ecommerce photography can get pretty pricey. If you bought photography or video equipment for business use, you can use that as one of the many ecommerce tax deductions. Don’t limit yourself to just the cameras – any additional equipment like tripods, additional lenses, lighting, etc. are also deductible.
#10 – Subcontractor Costs
Everything that you pay to contractors like graphic designers, photographers, web developers, bookkeepers, content writers, and office assistance, is entirely deductible. If you pay any subcontractor over $600 for the year, be sure that you file a 1099 for them.
#11 – Car Expenses
If you use your car to do things like mail packages, meet with customers, or conduct other business activities, your car becomes one of your ecommerce tax deductions. If your car is used exclusively for business needs, you can claim the entire cost of operation. If you use it for both personal and business, you can deduct the percentage that you use for business purposes.
When you deduct for mileage, you have two options. You can either deduct the standard 56 cents per mile, or the actual cost of gas, oil changes and other car-related expenses.
If you travel for business you can also deduct costs like parking fees, transportation charges, cab fare, tips, conference tickets, etc.
#12 – Education
If you take online courses, attend webinars, or in-person classes that relate to your business, you can deduct the enrollment costs. Be aware though, the courses have to be applicable to your business. They don’t necessarily have to be related to your industry or products, but they do have to be business related. For example, a course on social media marketing would be considered legitimate for ecommerce business owners.
Always Check with a Tax Professional
The above list isn’t comprehensive, but it’s a good starting point. Be sure to talk with your CPA or tax professional to see if there are other qualified deductions that you can take. Every little bit will help lower the amount you owe for your business taxes.