Schedule C Business Expenses - What Can I Actually Deduct?

You've got a good start by tracking your materials, packaging and shipping! Those are definitely deductible on Schedule C. For your other questions: Yes, you can deduct a portion of your internet if you use it for business. The key is determining what percentage is business vs. personal use. Be honest but reasonable - if you're running an Etsy shop, a significant portion is likely business-related. For the home office, you can take a deduction if you use that space regularly and exclusively for your business. Measure the square footage of your workspace and divide by your home's total square footage to get the percentage. You can then deduct that percentage of rent/mortgage interest, utilities, insurance, etc. Or use the simplified method ($5 per square foot up to 300 sq ft). Regarding receipts - while bank statements show you spent money, they don't show what you bought. Keep all receipts for business purchases. Digital copies are fine! Take photos of paper receipts before they fade. Other deductions to consider: any courses you took related to jewelry making, business software subscriptions, a portion of your cell phone bill if used for business, and mileage for business-related travel (like going to craft fairs or supply stores).

I was in a similar situation last year with my woodworking business. I tried figuring it out myself but got super confused with all the deductions and ended up missing a bunch of stuff I could have claimed. Found this AI tool called taxr.ai (https://taxr.ai) that was a game changer. You upload your receipts and business docs, and it tells you exactly what you can deduct on Schedule C. It caught like $2,300 in deductions I would have missed completely - things like a portion of my car insurance when I used my vehicle for supply runs, and some home office stuff I didn't know I could claim.

Just wanted to update after trying taxr.ai for my Etsy business taxes. I was really skeptical at first but decided to give it a shot. It was actually super helpful with my Schedule C! I uploaded my bank statements and some receipts, and it categorized everything automatically. The best part was it found several deductions I would have missed - like my Canva Pro subscription I use for designing product listings and a portion of my cell phone bill since I use it for business calls and Instagram marketing. It explained that my camera was eligible for a 90% business deduction since I documented that's how much I use it for product photography. Even helped me understand how to properly document mixed-use assets to avoid audit issues. Definitely worth trying if you're confused about Schedule C deductions!

If you need to actually talk to someone at the IRS about your Schedule C questions (I did when I first started my business), good luck getting through on the phone. I tried for WEEKS and kept getting disconnected or waiting for hours. Finally found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 20 minutes. They have a demo video here: https://youtu.be/_kiP6q8DX5c I had specific questions about vehicle expenses on Schedule C since I was delivering my products locally, and the IRS agent walked me through exactly how to document and claim those expenses properly. Saved me so much stress trying to interpret the IRS guides on my own.

OK I need to eat my words. After posting that skeptical comment, I was still struggling with my Schedule C and decided to try Claimyr out of desperation. It actually worked exactly as described. Got a call back in about 15 minutes and was connected to an IRS agent who helped me understand how to properly categorize my mixed business/personal expenses on Schedule C. The agent walked me through the home office deduction calculation and confirmed I was eligible even though my workspace is in a corner of my living room (as long as that specific area is used exclusively for business). They also explained the difference between direct and indirect expenses, which my tax software didn't make clear at all. 100% worth it just to get definitive answers from an actual IRS employee.

Don't forget about self-employment tax on your Schedule C income! That caught me by surprise my first year. After deducting your expenses, you'll pay about 15.3% in SE tax on your profit ON TOP OF regular income tax. But the good news is you can deduct half of that SE tax on your 1040, which helps a little.

Has anyone used the new "simplified home office deduction" for Schedule C? Is it better than the regular method?

Great question! I went through the same confusion when I started my photography business. Here's what I learned: For your specific situation with $12,500 in revenue and $4,800 in tracked expenses, you're on the right track. Beyond materials/packaging/shipping, you can definitely deduct: **Internet & Phone**: Yes, deduct the business portion of your internet bill. If you use it 60% for business, deduct 60%. Same with your cell phone if you use it for customer communication. **Home Office**: If that spare bedroom is used EXCLUSIVELY for your business, you qualify for the home office deduction. Calculate the percentage of your home's square footage and deduct that percentage of rent/utilities/insurance. Or use the simplified method ($5 per sq ft up to 300 sq ft). **Other common Etsy deductions you might be missing**: - Etsy listing fees and transaction fees - PayPal/payment processing fees - Photography equipment (cameras, lighting, tripods) - business use percentage - Computer/software used for business - Mileage to buy supplies or ship items - Any business books, courses, or educational materials **Documentation**: Bank statements show you spent money, but receipts show what you bought. The IRS wants to see what the expense was for. Keep digital copies of all receipts - take photos immediately since thermal receipts fade. TurboTax's categories can be confusing, but when in doubt, "Other business expenses" works for legitimate costs that don't fit elsewhere. Just include a description of what it was for. You're doing great by tracking everything from the start!