Tax Deductions for Etsy Sellers, Fiverr Freelancers & Upwork Pros

The Platform Takes a Cut. The IRS Takes Another. Take Both Back.

If you sell on Etsy, freelance on Fiverr, or work through Upwork, you already know the platform takes 5–20% of your earnings. What many platform freelancers miss is that those platform fees — and dozens of other expenses — are fully deductible on your taxes.

The IRS does not care which platform you use. You are self-employed, you file Schedule C, and every ordinary and necessary business expense reduces your tax bill.

Here are the deductions specific to each platform, plus the universal ones every platform freelancer should claim.

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Part 1: Etsy Seller Tax Deductions

Etsy charges multiple fees, and every single one is deductible:

Etsy Platform Fees

Pro tip: Download your Etsy Seller CSV from Shop Manager > Finances > Legal & Tax at year end. This shows every fee broken down by type. Total them up for your Schedule C.

Etsy-Specific Deductions Beyond Fees

Materials and supplies: Fabric, beads, paint, wood, resin, packaging materials, labels, stickers, tissue paper, poly mailers, boxes — everything that goes into or around your product.

Shipping costs: Postage, shipping labels, packing tape, bubble wrap, shipping insurance. If Etsy charges you for shipping labels, those are deductible. If you buy postage at the post office, that is deductible too.

Photography equipment: Camera, tripod, lightbox, backdrops, photo editing software. Product photos are the lifeblood of Etsy — equipment to create them is a business expense.

Craft tools and equipment: Sewing machine, Cricut, 3D printer, heat press, tools, dies, molds. Items over $2,500 may need to be depreciated rather than expensed in full, but the Section 179 deduction lets most small businesses expense equipment immediately.

Craft show and market fees: Booth rental, table fees, event insurance, travel to craft fairs. If you sell at local markets in addition to Etsy, those costs are deductible.

Packaging and branding: Custom packaging, branded stickers, thank-you cards, business cards, branded tape. These are advertising/marketing expenses.

Inventory storage: If you rent a storage unit for inventory, the full rent is deductible. If you use part of your home, claim the home office deduction.

Example deduction breakdown for an Etsy seller earning $40,000:

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Part 2: Fiverr Freelancer Tax Deductions

Fiverr's fee structure is simpler but still significant:

Fiverr Platform Fees

The 20% fee is your biggest deduction. On $50,000 of Fiverr earnings, that is $10,000 in deductible fees alone.

Important: Fiverr reports your gross earnings on your 1099-K (the amount the buyer paid before Fiverr's cut). You must deduct the fees on Schedule C to reach your actual income. If you forget to deduct the fees, you are paying taxes on money you never received.

Fiverr-Specific Deductions Beyond Fees

What category you are in determines your unique deductions:

Graphic designers and video editors:

• Adobe Creative Cloud ($55/month = $660/year)
• Stock photos and videos (Shutterstock, Envato Elements)
• Fonts and design assets
• Drawing tablet (Wacom, iPad + Apple Pencil)
• Monitor(s) for design work

Writers and copywriters:

• Grammarly Premium ($12/month)
• SEO tools (Ahrefs, Semrush, Surfer SEO)
• Research subscriptions (industry publications, databases)
• AI writing tools

Developers and programmers:

• GitHub Pro ($4/month)
• Cloud hosting for development (AWS, DigitalOcean)
• IDE licenses (JetBrains, etc.)
• Domain names for portfolios and testing
• API subscriptions for development

Voice-over artists:

• Microphone and audio interface
• Soundproofing materials
• Audio editing software (Adobe Audition, Audacity Pro)
• Pop filters, boom arms, shock mounts

Virtual assistants:

• Project management tools (Asana, Monday)
• Communication tools (Zoom Pro, Slack)
• Time tracking software
• Cloud storage for client files

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Part 3: Upwork Freelancer Tax Deductions

Upwork's sliding fee scale means your deductions change as your client relationships grow:

Upwork Platform Fees

Pro tip: If you have long-term Upwork clients, your effective fee rate drops to 5%. But you still need to deduct the blended rate for the year. Download your transaction history from Reports > Transaction History.

Upwork-Specific Deductions Beyond Fees

Connects purchases: Yes, buying Connects to submit proposals is a deductible business expense (advertising/lead generation).

Skills tests and certifications: If you pay for Upwork-recognized certifications or take courses to improve your profile, these are deductible as education expenses.

Portfolio hosting: If you maintain a personal website to supplement your Upwork profile, domain, hosting, and design costs are deductible.

Specialized deductions for common Upwork categories:

Web developers:

• Hosting accounts for client projects
• Domain registrations
• Premium WordPress themes and plugins
• Development tools and IDE subscriptions
• Testing devices (phone, tablet for responsive testing)

Content writers:

• Research subscriptions and databases
• Plagiarism checking tools (Copyscape)
• Content optimization tools
• Style guides and reference books

Data analysts:

• Software licenses (Tableau, Power BI)
• Cloud computing costs (for large datasets)
• Online courses in data science
• Statistical software (SPSS, SAS — or free R/Python, but paid add-ons)

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Universal Deductions for All Platform Freelancers

Regardless of which platform you use, these deductions apply:

Home Office

If you freelance from home (and most platform workers do), claim the home office deduction. The simplified method gives you up to $1,500. The regular method can yield more.

Internet and Phone

Deduct the business percentage of your internet bill and phone plan. If you use your internet 70% for work, deduct 70% of the bill.

Computer and Equipment

Your laptop, desktop, monitor, keyboard, mouse, webcam, headset — all deductible. Items under $2,500 can be expensed in full in the year purchased.

Software Subscriptions

Every tool you use for freelancing:

• Accounting (QuickBooks, FreshBooks, Wave)
• Communication (Zoom, Slack, Google Workspace)
• Project management (Notion, Asana, Trello)
• Cloud storage (Dropbox, Google Drive)
• AI tools (if used for client work)

Health Insurance

If you are not covered by a spouse's employer plan, self-employed health insurance premiums are deductible above the line — reducing both income tax and potentially your AGI for credit eligibility.

Retirement Contributions

SEP IRA, Solo 401(k), or SIMPLE IRA contributions are deductible. This is often the largest tax reduction available.

Professional Development

Online courses, books, conferences, workshops, and certifications related to your freelance skills are deductible as education expenses.

Bank and PayPal Fees

Fees from PayPal, Wise, Stripe, or other payment processors are deductible. Currency conversion fees count too if you work with international clients.

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The 1099-K Trap: Do Not Pay Tax on Money You Never Received

Starting in 2024, platforms must issue a 1099-K for payments over $600. This reports your gross earnings — the total amount buyers paid, before platform fees.

Example:

• Buyer pays: $1,000
• Fiverr takes 20%: $200
• You receive: $800
• 1099-K reports: $1,000

If you enter $1,000 as income on Schedule C without deducting the $200 fee, you pay tax on $200 you never received. This mistake costs platform freelancers hundreds of dollars every year.

How to fix it: Report the 1099-K amount as gross income on Schedule C, then deduct platform fees as a business expense. Your net income (and tax bill) reflects what you actually earned.

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Tax Calendar for Platform Freelancers

Pro tip: Set a calendar reminder on January 15 each year to download all your platform reports before they potentially change or become unavailable.

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Platform-Specific Tax Resources

• Etsy: Shop Manager > Finances > Legal & Tax > Download CSV
• Fiverr: Revenue tab > Download your earnings report
• Upwork: Reports > Transaction History > Export

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Start Tracking Your Platform Deductions

Platform fees alone can save you thousands in taxes — but only if you track and deduct them. Add in home office, equipment, software, and professional development, and most platform freelancers can reduce their tax bill by $3,000 to $10,000.

Use our tax calculator to see how much you could save based on your freelance income and expenses. Then sign up for TaxPilot to automatically categorize your deductions throughout the year — so tax time is just a download, not a scramble.