Ecommerce is booming, with millions of sellers running online stores on Shopify, Amazon, Etsy, eBay, and dropshipping platforms. Whether you're a side hustler or full-time entrepreneur, understanding ecommerce tax deductions is crucial for minimizing your tax bill and maximizing your profit.
The IRS allows ecommerce sellers to deduct many business-related expenses, helping reduce taxable income. However, proper tracking and compliance are essential.
Let’s break down key tax-deductible expenses ecommerce sellers can claim.
Your online storefront is essential—and 100% deductible. This includes:
Example: If you pay $29/month for Shopify, that’s $348/year fully deductible.
The cost of goods sold (COGS) is one of the largest deductions for ecommerce businesses. This includes:
Tip: For dropshippers, supplier fees and product costs per order are deductible, even if you don’t hold inventory.
Promoting your store drives sales—and expenses here are tax-deductible.
Note: Track ad spend across all platforms; even small campaigns add up.
Shipping products to customers? You can deduct:
Pro tip: Keep all receipts and invoices from your shipping providers.
Most ecommerce businesses rely on software tools. These are deductible:
Example: If you pay $25/month for QuickBooks, you can deduct $300/year.
Working from home? The IRS allows a home office deduction if you use part of your home exclusively for business. Deductible expenses:
Tip: Use the simplified method ($5 per square foot, up to 300 sq. ft.) or actual expenses method.
Traveling for ecommerce purposes? Deduct:
Important: Keep detailed records and only deduct business-related travel.
Yes, Shopify-related expenses are generally fully deductible as business expenses if you're using the platform to operate your business. This means you can subtract these costs from your income when calculating your taxable profit, helping to lower your tax bill. Common deductible Shopify expenses include:
Pro tip: Shopify provides invoices for all charges—download them monthly or annually to stay organized and simplify your expense tracking come tax time.
If you sell products online, you’re responsible for several tax obligations—just like any other business. Here’s what ecommerce sellers need to know:
Pro tip: Set aside 25–30% of your profits for taxes throughout the year to stay ahead and avoid surprises at tax time. Working with an accountant familiar with ecommerce can also help you maximize deductions and stay compliant.
If you’re launching a new ecommerce business, you might qualify for a valuable tax break: the IRS startup deduction. In your first year of business, you can deduct up to $5,000 in eligible startup costs, helping you lower your taxable income right out of the gate.
What counts as startup costs?
Expenses that are directly related to setting up your business may qualify, including:
Important: This deduction phases out if your total startup costs exceed $50,000.
Yes—if used for business. Examples of deductible purchases:
Caution: Keep business and personal purchases separate. Use a dedicated Amazon Business account if possible.
Tip: Tag business purchases and keep receipts for easy expense categorization.
Running a dropshipping business comes with a variety of expenses—and the good news is, many of them are tax-deductible. These deductions can help lower your taxable income and improve your bottom line.
Here are common write-offs for dropshippers:
All of these are considered ordinary and necessary business expenses by the IRS, meaning they’re generally deductible if they directly support your dropshipping operation.
Pro tip: Forming an LLC (Limited Liability Company) can help protect your personal assets from business liabilities and may simplify your tax filing, especially as your business grows. Always consult with a tax advisor to ensure you're making the most of your deductions and staying compliant.
Want to reduce your tax bill legally and keep more of your profits? The key is staying organized and proactive throughout the year. Here’s how ecommerce sellers can maximize deductions and simplify tax season:
Bonus tip: Staying consistent with your record-keeping can lead to bigger deductions, fewer headaches, and peace of mind knowing your business is running efficiently and legally.
Ecommerce tax deductions can dramatically lower your taxable income, letting you reinvest in your business. From Shopify fees to ad spend, knowing what to deduct—and how to track it—is key to maximizing your savings.
Start early, stay organized, and consult a tax expert to ensure you're claiming every deduction you deserve.
Maximize your ecommerce tax deductions! Work with a tax expert to ensure you claim every eligible write-off and keep more of your business profits.
Yes, Shopify fees, domain costs, and plugins are fully deductible.
You must report income, collect sales tax, and make estimated tax payments.
It’s a startup cost deduction for new businesses, up to $5,000.
Yes, if they’re business-related, like inventory or office supplies.
Product sourcing, supplier fees, ad spend, and software tools.
