Etsy seller taxes: a plain-English guide

If you sell on Etsy to make money, the IRS treats it as a business. Here's what that means for a US seller, from the 1099-K to the deductions most people miss.

Updated 28 September 2026 · US federal tax

Is Etsy income taxable?

Yes. Profit from selling on Etsy is taxable income whether or not you get a tax form and however small the shop. A shop run to make a profit is reported on Schedule C as a business. Occasionally selling your own used belongings for less than you paid is different: that's not a profit, so there's usually no tax.

Form 1099-K

Etsy sends a Form 1099-K when your sales pass the federal reporting threshold, which is back to more than $20,000 and more than 200 transactions in a calendar year. Some states use a lower threshold. The form shows your gross sales, before any fees or refunds, so the number will be bigger than your profit. That's expected: you report the gross amount and deduct your costs on Schedule C.

Below the threshold you won't get a form, but the income still goes on your return.

What you can deduct

• Etsy fees: listing fees, transaction fees, payment processing fees, Etsy Ads, Offsite Ads and shipping labels bought through Etsy. Your monthly payment account statement lists them.
• Cost of goods sold: materials and supplies that go into what you sell, and packaging.
• Shipping you pay outside Etsy.
• Equipment and software: printers, cameras, design software and subscriptions.
• Home office if you use a space regularly and only for the business (the simplified method is $5 per square foot, up to 300 sq ft).
• Business miles for supply runs and post office trips, at the IRS standard mileage rate.

Self-employment tax and quarterly payments

On top of income tax, a profit of $400 or more means self-employment tax of about 15.3% on 92.35% of the profit. If you expect to owe $1,000 or more for the year, the IRS wants quarterly estimated payments. The quarterly tax calculator gives you the amount.

Sales tax

Etsy collects and pays sales tax for orders shipped to US states with marketplace facilitator laws, which is now all states with a sales tax. That sales tax isn't your income: leave it out of your sales figure.

Keep records from day one

Download your Etsy sales CSV and monthly statements, keep receipts for supplies, and log miles on the day. At tax time you'll need total sales, refunds, each category of fee and your other costs, which is easy with a year of records and painful without.

General information for planning, not tax advice. Rules for your state may differ.