Is "free shipping" tax deductible?

[greyparrot]

I offer free shipping on my items so, obviously, I absorb that cost.  Does anyone know if i can claim my out lay $ for shipping as business expenses?

[evry1nositswindy]

Line 18 on Schedule C is for postage and office supplies.  I was just working on mine!

[alcoforever]

Your shipping cost is definitely a deductible expense.

[stainlessenginecovers]

So are the FEES that ebay charges (at minimum)

[nobody*s_perfect]

The amount that a seller spends on postage and other shipping expenses is an allowable expense, regardless of whether they offered "Free" shipping or not.

[katzrul15]

@greyparrot 

Your total cost of Goods sold (COGS) includes what the Buyer "paid" for their order, minus sales tax.

YOUR expenses, are the expenses you incurred (cost of the item, shipping, fees, mileage, supplies, toner, etc etc etc etc).  Whatever your total expenses are, are your deductions (in theory) - if you are a hobbyist, this is no longer true, but if you sold to make a profit, then yes.  

If you sold an item for $15 + free shipping - your gross on this item is $15

Your deductions would be ($3 item cost + $1.70 fees + $4 shipping + .75 cent mailer +.06 tape + .12 label =  $9.63 in deductions/expenses for a net profit of $5.37.  (which depending on other expenses/deductions you may or may not owe tax on)

[coolections · Accepted solution]

Yes, shipping cost is deductible. Unless you have some special power to let the post office ship your items for free.

[mr_lincoln]

@greyparrot   Anything you spend out of pocket on shipping is a deduction ... the setting on eBay for Free Shipping is just an enticement for Buyers who know your price includes the shipping costs.

Mr. L

[greyparrot]

Thank you for that specific form info! I knew office/packing supplies were A/ok
 but there has been such conflicting info regarding shipping costs.
Best place 'eva, to get input = right here!!!

[greyparrot]

That was incredibly helpful and much appreciated information..some of which i was NOT aware of. Thank you ever so much!

[waterdoggmom]

" if you are a hobbyist, this is no longer true, but if you sold to make a profit, then yes.  "

I have ramped up my selling in the past three months.   It's 95% stuff from my personal collection.   I am cleaning out after a big downsizing/move.    I am keeping copious records of the sales, and I am wondering:  when does one stop being a "hobbyist" seller (thinking of when 2022 tax time rolls around....).  Thanks!

[lepke1979]

Do yourself a favor and pick up this book:

Deduct It!: Lower Your Small Business Taxes (18th Edition) by Stephen Fishman J.D.

That should be the latest edition. Can find it here, Amazon, maybe elsewhere. I found an earlier edition fairly easy to read. So should hopefully still be the case. Although I'm weird because I find this stuff interesting so you might find it more difficult. And the stuff inside is helpful to learn even if you plan to have someone else do your taxes.

And you can consider it a business education expense for next years taxes.

[soh.maryl]

When a seller offers free shipping on his listings, doesn't that mean, in most cases, that he has simply built the shipping cost into the price of the item which the seller pays?

For instance, I am selling my widget for $10 with $3 shipping.

You are selling that same widget for $13 with free shipping.

But you "absorb that cost"? 

[nobody*s_perfect]

---

@waterdoggmom wrote: ... I am wondering:  when does one stop being a "hobbyist" seller ...

---

The IRS distinction between "hobby" vs "business" is based mostly on bookkeeping and profitability. Whether or not you can deduct shipping costs and other expenses depends on whether the IRS sees you as a hobby or as a business.  This is based mostly on profitability, you do NOT have to be a "registered business."  Here are some useful background information pages that the IRS has put together.

Defining business vs hobby:  https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

Paying taxes if you're a hobby: https://www.irs.gov/newsroom/heres-what-taxpayers-need-to-know-about-paying-taxes-on-their-hobby-act...

[reallynicestamps]

You do NOT absorb the cost of Free Shipping.

You include the cost of shipping in your asking price.

 Which is cheaper - a $10 item with $5 shipping or a $15 item with Free Shipping.

If you are charging $10 with Free Shipping, you have a $5 with $5 shipping.

As others have said, your actual shipping and packaging costs are deductible.