10 Essential Deductions for Amazon FBA Sellers in 2024

Keep accurate records of expenses to maximize tax deductions for Amazon FBA sellers.

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Block illustration of an Amazon FBA seller's workspace with icons representing key tax deductions.

Tax time doesn’t have to be a drain on your profits. Knowing which deductions you can take can save you money and fuel your Amazon FBA business’s growth. This guide breaks down ten key deductions and offers tips for making the most of them.

Understanding “Ordinary and Necessary” Expenses

The IRS allows deductions for expenses that are both “ordinary” and “necessary” for your business. “Ordinary” means common and accepted in your industry (like buying products to sell). “Necessary” means helpful for your business operations (like a laptop for managing your Amazon store).

10 Key Tax Deductions for Amazon FBA Sellers

  1. Cost of Goods Sold (COGS): This includes the cost of manufacturing, purchasing wholesale, and shipping your products to your warehouse or Amazon’s fulfillment centers. Important note: You deduct the cost of goods sold during the year, not your entire inventory.
  2. Inventory Storage Fees: Storing your inventory costs money, whether you use Amazon FBA or a third-party warehouse. These fees are deductible, even long-term storage fees (though minimizing those is always a good idea!).
  3. Home Office Deduction: If a dedicated part of your home is exclusively and regularly used for your business, you can deduct some of your home-related expenses. This means a space used only for your business, not a guest room that doubles as an office. This can include portions of your rent/mortgage interest, utilities, and homeowners’ insurance. The IRS offers two calculation methods: simplified and regular. Check IRS Publication 587 to see which works best for you. Accurately measuring your dedicated workspace is essential.
  4. Shipping Costs: Getting your products to Amazon’s fulfillment centers is a deductible expense. This includes shipping fees, postage, and even the cost of packaging materials like boxes, tape, and labels.
  5. Packaging Materials: Keep good records of what you spend on packaging materials. These costs are deductible and can add up.
  6. Office Supplies: Basic office supplies like pens, paper, printer ink, and staplers are deductible, as long as they are used solely for your business.
  7. Software and Tech Tools: Software essential for your FBA business, such as accounting programs, inventory management tools, and web hosting, is deductible. If you use these tools for personal and business purposes, deduct only the portion used for business. Keep detailed records to support your deduction.
  8. Advertising and Marketing: Investing in marketing helps grow your sales. The good news is these costs are deductible! This includes Amazon PPC campaigns, social media ads, email marketing, and other promotional activities.
  9. Professional Services: Hiring experts like accountants, lawyers, or virtual assistants can boost your business. Their fees are deductible. Remember to get a Form 1099-NEC from each contractor to report their payments to the IRS.
  10. Business Travel Expenses: If you travel for business, several expenses are deductible:
    • Car Expenses: You can either use the standard mileage rate (65.5 cents per mile in 2024) or deduct your actual car expenses (gas, maintenance, depreciation). Maintain a mileage log detailing the date, purpose, and miles driven for each business trip.
    • Meals: 50% of the cost of business meals is generally deductible. Document the date, place, business purpose, and who was present.
    • Lodging: Hotel costs incurred during business trips are deductible.

Making Tax Time Easier

Keep Excellent Records: Detailed records of income and expenses are crucial. This helps you accurately claim deductions and avoid issues with the IRS. Consider using accounting software designed for e-commerce businesses.

Get Professional Tax Advice: Tax laws are complex and constantly changing. A qualified tax professional can help you maximize your deductions and ensure you’re complying with all regulations. They can also advise on tax planning strategies specific to your business.

Navigating the complexities of taxes for your Amazon FBA business can be challenging. For expert guidance and support, consider reaching out to XOA TAX. We can help you optimize your tax strategy and ensure you’re taking advantage of all available deductions.

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