Can I Write Off Shipping Costs on My Taxes?

When self-employed people can deduct shipping costs

Michael Coronado, the vice president of accounting firm Pronto Income Tax, explains it like this: You can deduct the cost of shipping if it’s a legitimate business expense related to promoting your work, shipping products to customers, or mailing contracts or essential documents.

“This is considered a cost of doing business,” Coronado says.

For online sellers shipping items to customers, these expenses might include:

• Shipping supplies like tape, envelopes, and bubble wrap

• Label-making supplies like paper, labels, markers, or printer ink

• Shipping fees — including if you prepaid for labels on third-party apps like Poshmark, Mercari, and eBay

The main point? The expense should have been incurred in order to send your item to your customer.

Are shipping costs part of COGS?

No. The cost of shipping goods to a customer is not part of COGS, or the cost of goods sold. Instead, it should be deducted as a shipping cost.

First, let’s define COGS. This acronym refers to how much a product or service costs to produce. If you sell homemade knitwear, for example, the cost of yarn and knitting needles would factor into your COGS. If you sell printables on Etsy, the cost of the software you use to create your products is part of your COGS. Independent contractors are allowed to deduct COGS on their taxes using box 38 of Schedule C. (More on Schedule C in a second.)

Here’s where it gets a little complicated. If that software needs to be shipped to you (and you pay for shipping), that cost is part of COGS. However, once you’re shipping the products to a customer, the cost of shipping is no longer part of COGS. You can still write it off, but it’s a shipping deduction.

Deducting shipping costs as a travel expense

If you’re shipping something related to an upcoming business trip, it’s deductible as a travel expense. For example, if you’re shipping items for a conference display or sending them off to be handed out at a vending table, they fall under this category. I once had to pay to ship books to a conference for a book signing (being an author can get expensive!), and I now know to add such expenses to my travel write-offs. Other deductible travel expenses include transportation, meals, and accommodations. For more information, check out Keeper’s guide to travel expenses, so you can make sure that you’re writing off everything you can.

Deducting shipping costs for business-related gifts

Send gifts to customers or vendors? We have good news: Business gifts are allowed as a tax write-off, with a limit of $25 per person per year, according to the IRS. However, “incidental costs” like shipping and wrapping are not included in this limit. In other words, shipping and wrapping for gifts are non-deductible expenses.

How to deduct shipping costs using Schedule C

“Shipping costs are typically reported on Schedule C, which is the form used for reporting income and expenses for sole proprietorships and single-member LLCs,” Coronado says. As a business owner, whether you’re full-time or part-time, this form is essential. (Read Keeper’s guide to Schedule C if you want a comprehensive how-to.)

You’ll account for shipping-related tax deductions on Line 27a — “other expenses.” This line mentions Line 48, which should be the details behind the amount you enter for Line 27a.

If you’re wondering what your other deductible expenses might be, Keeper does a fantastic job of helping you navigate the entire tax process. I started using Keeper in 2023 (yes, I pay for my subscription!), and it’s really helped me sort out my expenses. Investing in your business is worth it!

When shipping costs can’t be deducted

It’s essential to understand that shipping cannot be deducted for personal purposes. If I send a book to a family member, for example, I can’t deduct the shipping cost. But if it’s related to a business activity — you’re mailing your newest Etsy customer those rad stickers they purchased, for instance — you can write off everything you bought in order to get your goods to your customer.

Coronado also noted that if someone else pays for shipping (your client or customer, for instance), you cannot write it off. The same goes for if you’re reimbursed for shipping — only expenses that you actually pay for are eligible.

It’s crucial come tax time to know what you can and can’t write off. Shipping supplies, postage, and other expenses related to getting your product to your consumer can all be added to that write-off list.

Here’s to your shipping success!