Can I Write Off Products I Sell?

eBay sellers should recognize that tax deductions may present assistance in lowering the taxable income but not all expenses are eligible. One of the most common questions sellers ask is whether they can deduct the cost of the products they sell. The short answer? Yes—but only under specific conditions.

Understanding Inventory and Deductions

Primarily, the Cost of Goods Sold (COGS) is a deductible expense for eBay sellers operating as a business. These costs refer to the amount paid for inventory:

• Wholesale purchases: Items bought in bulk for resale purposes.
• Used goods purchased for resale: Thrift store finds, estate sale purchases or second-hand items purchased for resale.
• Manufacturing costs: In the case of creating handmade products, the materials and supplies are used in production.

COGS is only deductible once the product is sold—it should be recognized that the inventory still sitting on the shelf at year-end cannot be deducted.

What About Personal Items Sold on eBay?

Selling second-hand items like clothes, furniture as well as electronics, does not qualify for business deductions. However:

• In the case the item is sold at a loss (for less than its original purchase price), the IRS does not accept this as a deductible business loss.
• If individuals regularly flip used goods for profit, the IRS may consider them business sellers, which changes the tax obligations.

How to Report and Deduct Inventory Costs

The detailed records of the COGS should be kept in order to deduct them properly:

• Purchase receipts and invoices
• Supplier information
• Item descriptions and sale prices
• Beginning and ending inventory for the year

COGS are reported by most eBay business sellers on Schedule C (Profit or Loss from Business) when filing taxes.

Final Thoughts

eBay sellers can write off the cost of products they sell. However, only inventory properly tracked under COGS is deductible. If you are not sure about which deductions apply to you, a consultation with a CPA experienced in eBay seller tax deductions can present expert aid in optimizing your tax savings.