Marketplace and payment-processing fees
Keep Etsy statements showing listing, transaction, advertising and payment-processing charges.
How do Etsy seller taxes work in 2026?
Online sellers should reconcile marketplace reports with their own books because deposits can be lower than gross customer payments after fees, refunds or other charges. Inventory and cost-of-goods-sold issues can also be more complex than ordinary operating expenses, so the simple calculator is a planning tool rather than inventory accounting.
The IRS says gig-economy income is taxable even when the work is part-time, temporary or not reported on an information return. Use the forms you receive to reconcile your records, but base the tax estimate on the complete business activity required by the tax rules.
EXPENSES TO REVIEW
Common tax deductions for a Etsy seller
These are categories to review, not automatic deductions. A cost still needs to meet the tax rules and be supported by records.
Shipping and packaging
Postage, boxes, mailers, labels and packing supplies used for customer orders may be business costs.
Materials and supplies
Track materials used to make products separately from general operating supplies.
Advertising and photography
Business advertising and product-listing costs may be relevant when ordinary and necessary.
Home office or workspace
A qualifying business-use-of-home deduction has specific rules; use the dedicated home-office calculator for planning.
RECORDKEEPING
What records should you keep?
- Marketplace annual statements and information returns if issued
- Sales, refunds and fee reports
- Inventory/material purchase records
- Shipping, packaging and advertising receipts
AVOID THESE
Common Etsy seller tax mistakes
- Using bank deposits as total revenue without reconciling fees
- Treating inventory purchases exactly like ordinary expenses without considering COGS rules
- Mixing personal craft purchases with business materials
- Assuming no 1099 form means no taxable income
QUARTERLY TAXES
Do you need estimated tax payments?
Self-employed 1099 workers may need estimated payments during the year. The amount to save and the amount to send this quarter are separate questions. If you also have a W-2 job, payroll withholding can affect how much tax remains unfunded.
1099 forms are not the whole tax return
The IRS states that gig-economy income is taxable even if no Form 1099-K, 1099-NEC or other information return is issued. Keep your own income and expense records and reconcile them to any forms you receive.
Why this is more useful than “just save 30%”
The mini calculator uses the same documented 2026 planning engine as Analyze My Income's main 1099 tools. It starts with gross 1099 income, subtracts the business expenses you enter, estimates self-employment tax, federal income tax and the selected state income-tax path, then expresses modeled taxes as a share of gross 1099 revenue. The full calculator can also account for W-2 wages, withholding, health insurance and payments already made.
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