20 Tax Deductions For Your Online Business to Save Thousands

The first criterion in an Omnisend study this summer that ranked states in terms of attractiveness when it comes to operating an ecommerce store was telling. It was taxes.

There’s no disputing that taxes can make or break you as an entrepreneur.

Back in 2016, when I launched my first ecommerce store, I had to learn this the hard way. My approach to taxes was mostly trial and error. I didn’t have a mentor yet, and I was still figuring out the basics like how to read financial documents, analyze them properly and build my own spreadsheets. I was getting better with software and tracking systems, but after a year, I realized something important: This wasn’t my strength. I needed a CPA who specialized in online businesses, someone who could guide me, especially when it came to deductions.

At the time, no one had ever explained to me how to maximize business deductions. I was only 21 or 22, still brand new to entrepreneurship, and in that first year, I learned quickly about all the expenses, especially those designated as “ordinary and necessary” by the IRS, that really add up. Even with a partner, ecommerce operators face costs like software tools, subscription fees and travel.

I want to elaborate a little on the latest developments regarding the interpretation of ordinary and necessary business expenses, which are now primarily being driven by the provisions of the 2025 One Big Beautiful Bill Act (OBBBA). The act permanently extends and modifies several relevant tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA), altering the treatment of specific expenses like Research and Experimentation (R&E) and business interest.

Related: Finally, Tax Season is Over. Or Is It? Here are 5 Things You Need to Do All Year to Reduce Tax-Season Stress.

Tackling these new developments, individually:

• R&E expenditures: Starting in 2025, domestic R&E expenses can be fully deducted in the year they are paid or incurred, reversing the TCJA’s requirement to amortize them over five years. The 15-year amortization period for foreign R&E expenses remains in effect. The law provides special transitional relief for small businesses with average gross receipts below $31 million, allowing them to retroactively apply the new expensing rules for taxable years beginning after Dec. 31, 2021.
• Business interest deductions: The OBBBA permanently allows businesses to include depreciation, amortization and depletion deductions when computing their adjusted taxable income for the business interest limitation under Internal Revenue Code Section 163(j). This provides for a more generous interest expense deduction and is retroactive to the beginning of 2025.

In addition, there have been recent judicial developments that entrepreneurs should take heed of, with the legal interpretation of “ordinary and necessary,” where the category has been reinforced by recent court decisions that emphasize the importance of proper documentation. These rulings highlight that taxpayers must substantiate business expenses with adequate records beyond just a credit card statement or a bank record.

Specifically:

• Substantiation is crucial: A February 2025 Tax Court ruling disallowed deductions for a self-employed individual who failed to provide documentary evidence for her claimed expenses. The court emphasized that bank and credit card statements, by themselves, do not provide sufficient detail on the business purpose of an expenditure.
• Purpose and reasonableness: Court decisions continue to uphold the principle that an expense must be “appropriate and helpful” to a business to be considered “necessary” and that an “inordinately large” expense may not be considered “ordinary,” even if it is necessary.

The changing landscape is a big reason why having a good CPA on your side is invaluable. They make sure everything is properly documented so you don’t leave money on the table.

A good operating partner will have recommended bookkeeping partners, who will make sure a client gets access to their own client portal. Such partners understand the ecommerce space. Good advice can mean substantial savings.

As a starting point, here are some common ecommerce-related deductions that I have taken through the years:

1. Amazon Seller Central fees (monthly subscription fee)
2. FBA (Fulfillment by Amazon) fees (pick, pack and shipping charges)
3. Referral fees (Amazon’s commission per sale)
4. Advertising costs (Amazon PPC campaigns, off-Amazon ads like Facebook/Google ads)
5. Inventory storage fees (monthly and long-term storage in Amazon warehouses)
6. Removal or disposal fees (when pulling inventory out of FBA)
7. Refund administration fees (when Amazon keeps part of the refund)
8. Software subscriptions (product research softwares like Helium 10, Jungle Scout, Keepa, InventoryLab, repricers, accounting software, etc.)
9. Product photography and video expenses
10. Freelancers/VA costs (Upwork, Fiverr, agency fees, virtual assistants)
11. Prep center or 3PL fees (inspection, labeling, shipping prep)
12. Shipping costs (to Amazon warehouses or direct to customers if FBM)
13. Office supplies (labels, boxes, tape, scales, etc.)
14. Computer and equipment (laptop (80% business 20% personal for example like I do), printer, camera, monitors, etc.)
15. Home office deduction (If you use part of your home exclusively and regularly for your business, you can claim this deduction)
16. Internet and phone bills (portion used for business)
17. Education and training (Amazon courses, books, webinars)
18. Travel expenses (trade shows, supplier meetings, mileage — miles on car when traveling for business, lodging)
19. Bank and payment processing fees (Payoneer, Transferwise, wire fees)
20. Professional services (CPA, tax strategist, business attorney)

Related: Make Tax Season As Painless as Possible by Taking These 6 Steps

In summary, strategic tax planning for an ecommerce store involves minimizing tax liability through careful business structure selection, maximizing deductions, meticulous record-keeping and diligent management of sales and international taxes.

Selecting an effective bookkeeping partner means finding someone who handles your accounts and keeps you informed throughout the year, not just at tax time.

The first criterion in an Omnisend study this summer that ranked states in terms of attractiveness when it comes to operating an ecommerce store was telling. It was taxes.

There’s no disputing that taxes can make or break you as an entrepreneur.