Yes, you can write off shipping costs on your taxes when they are ordinary and necessary expenses of a trade or business. That covers outbound postage and carrier fees, packaging supplies, shipping equipment, the miles you drive to drop off packages, and inbound freight on inventory you resell. The deduction runs through Schedule C for sole proprietors and single-member LLCs, and the expense has to connect to a genuine profit-seeking activity rather than a hobby.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
Who Can Deduct Shipping Costs
Internal Revenue Code Section 162 lets you deduct expenses that are ordinary (common in your line of work) and necessary (helpful and appropriate). A candle maker mailing orders, a consultant sending contracts, and a reseller paying for carrier pickups all clear that bar without difficulty.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
If the IRS decides your activity is really a hobby, Section 183 blocks you from using losses to offset wages or other income. The practical safe harbor: if the activity shows a net profit in at least three of the last five tax years, the IRS presumes you’re operating for profit. Miss that mark and you may have to show profit intent another way, such as a written business plan or documented efforts to increase revenue.2Office of the Law Revision Counsel. 26 USC 183 – Activities Not Engaged in for Profit
One boundary worth flagging. If you’re a W-2 employee paying shipping out of pocket for your employer, the Tax Cuts and Jobs Act suspended the deduction for unreimbursed employee business expenses from 2018 through 2025. Those provisions were set to expire after 2025, which could restore the deduction for 2026 as a miscellaneous itemized deduction subject to a 2% adjusted gross income floor. Because this area was in legislative flux going into 2026, confirm the current status before claiming anything, and ask your employer for reimbursement in the meantime.
Statutory employees sit in a middle ground. If the “Statutory employee” box is checked on your W-2, you report income and expenses on Schedule C the same as a self-employed person, and shipping costs are deductible there. You don’t owe self-employment tax on those earnings because Social Security and Medicare were already withheld. If you also have separate self-employment income, file a separate Schedule C for each.3Internal Revenue Service. Instructions for Schedule C (Form 1040)
What Shipping Costs Qualify
Outbound Postage and Carrier Fees
Every dollar you spend getting products to customers is deductible. USPS postage, UPS and FedEx charges, courier services, and freight for oversized items all count. General business postage qualifies too: mailing contracts, invoices, marketing pieces, and professional correspondence.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
Packaging Supplies
Boxes, bubble wrap, tape, poly mailers, shipping labels, and packing peanuts are deductible as materials and supplies. IRS guidance lets you deduct incidental supplies in the year you buy them, provided that skipping a running inventory doesn’t distort your income.4Internal Revenue Service. Deducting Business Supply Expenses For high-volume sellers, that line adds up quickly.
Shipping Equipment
Label printers, postage scales, tape dispensers, and similar equipment used primarily for shipping qualify. If an item costs $2,500 or less (for businesses without audited financial statements), you can expense it immediately in the year of purchase under the de minimis safe harbor election rather than depreciating it. Businesses with an applicable financial statement can use the election for items up to $5,000.5Internal Revenue Service. Tangible Property Final Regulations
Mileage to the Post Office
Driving packages to USPS, UPS, or FedEx is business use of your vehicle. The 2026 IRS standard mileage rate is 72.5 cents per mile.6Internal Revenue Service. 2026 Standard Mileage Rates A seller making three round trips a week of 10 miles each would deduct roughly $1,131 a year from mileage alone. You can use the standard rate or track actual vehicle costs, but you have to pick a method and keep a mileage log either way.
Inbound Freight Goes Through Cost of Goods Sold
Shipping you pay to receive inventory or raw materials doesn’t sit on the same line as outbound postage. Inbound freight gets folded into Cost of Goods Sold. This distinction trips up a lot of e-commerce sellers.
The reasoning: the cost of acquiring a product includes everything you paid to get it into your hands, not just the supplier’s invoice. Freight charges, handling fees, and shipping insurance on incoming inventory all get added to the value of that inventory, then deducted when the goods sell. The total dollar amount you deduct is the same; it just flows through a different part of the return and affects your gross profit.
Imported goods follow the same logic. Customs duties and tariffs on inventory you hold for resale get added to COGS. If the imported items are used directly in operations rather than resold, the duties may qualify as a standalone Section 162 business expense instead.
Dropshippers never touch inventory but still pay shipping baked into what suppliers charge. Those costs are deductible through the COGS section of Schedule C, the same as a traditional retailer. Sellers using fulfillment services like Fulfillment by Amazon or ShipBob pay fees covering picking, packing, storage, and shipping; these are ordinary business expenses tied to sales revenue. Whether you categorize fulfillment fees as part of COGS or as a separate operating expense depends on your accounting method, and either approach reaches the same deduction as long as you’re consistent from year to year.
Where Each Cost Goes on Schedule C
Sole proprietors and single-member LLCs report shipping deductions on Schedule C (Form 1040), and the line depends on the role of the expense.
- Outbound postage and general shipping go on Line 18 (Office expense), which covers postage. Mailing contracts, customer orders, and routine correspondence belong here.3Internal Revenue Service. Instructions for Schedule C (Form 1040)
- Packaging supplies also go on Line 18 when treated as shipping supplies. High-volume sellers who treat packaging as materials consumed in production may include them in Part III with COGS.
- Inbound freight on inventory goes in Part III as part of the COGS computation, and the total flows back to reduce gross income on Line 7.7Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)
- Vehicle mileage goes on Line 9 (Car and truck expenses), supported by a mileage log.
- Shipping equipment goes on Line 13 for depreciation, or Line 18 or Line 27a (Other expenses) if you’re expensing it immediately under the de minimis safe harbor.
- Fulfillment service fees go on Line 10 (Commissions and fees) or Line 27a (Other expenses), depending on how the fee is structured.
Records You Need to Keep
The IRS doesn’t require a specific format, but you need enough documentation to reconstruct every shipping deduction if questioned. Keep carrier invoices, postage receipts, packaging purchase records, and mileage logs showing dates, destinations, and business purpose. Digital records are fine if they’re legible and organized.
Keep records for at least three years from the date you file. If you underreport gross income by more than 25%, the IRS can look back six years, so six years is a reasonable default given how cheap storage is.8Internal Revenue Service. How Long Should I Keep Records
What Happens If You Overreach
Claiming shipping deductions you can’t support costs more than the deduction itself. Under Section 6662, the IRS imposes an accuracy-related penalty of 20% on the portion of any underpayment caused by negligence, disregard of tax rules, or a substantial understatement of income.9Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments On a $5,000 disallowed deduction in the 22% bracket, that’s $1,100 in additional tax plus a $220 penalty. The penalty can be reduced or avoided if you adequately disclosed the position and had a reasonable basis for it, but assuming a cost counted, without documentation, won’t clear that bar.10eCFR. 26 CFR 1.6662-2 Accuracy-Related Penalty
The most common mistake isn’t fabricated deductions. It’s mixing personal and business shipping on the same carrier account and deducting the whole bill. If your UPS account handles both holiday gifts and customer orders, split the costs and document which shipments were business. Auditors watch for round numbers and suspiciously clean totals, so transaction-level records are the strongest defense.