Etsy Tax Guide for Sellers 2026

Educational information, not professional tax advice. Consult a tax professional for your situation.

Is Etsy income taxable?

Yes, always. Any income from Etsy — whether $200 or $200,000 per year — is taxable. In the US, report on Schedule C. Net profit over $400/year triggers self-employment tax (15.3%). Etsy sends a 1099-K if you had $600+ in Etsy Payments transactions.

Key deductions for Etsy sellers

Cost of goods sold (COGS)

Every material that goes into your product: yarn, wax, beads, fabric, ink, paper, font licenses, Canva subscriptions for designs you sell.

Shipping and packaging

Postage, shipping labels, boxes, mailers, tissue paper, tape, bubble wrap — everything that goes into getting your product to the buyer.

Etsy fees

Listing fees, transaction fees, payment processing fees, Etsy Ads spend, Etsy Plus subscription — all deductible.

Equipment and tools

Cricut machine, printer, camera and lenses, photography lights, ring light, foam board. Usually depreciated over multiple years for large items.

Software subscriptions

Canva Pro, Adobe Creative Suite, ListifyAI, accounting software, scheduling tools — all deductible if used for business.

Home office deduction

If you have a dedicated space used exclusively for your Etsy business, you can deduct a portion of rent/mortgage, utilities, and internet proportional to the office size.

Sales tax

In the US, Etsy automatically collects and remits sales tax for most states under Marketplace Facilitator laws. You generally don't need to collect or remit state sales tax separately — Etsy does it for you.

Quarterly estimated taxes (US)

If you expect to owe $1,000+ in taxes for the year, pay quarterly estimated taxes (April 15, June 15, September 15, January 15). Simple approach: set aside 25-30% of every Etsy payment received.