For sellers in the US. Schedule C is a US tax form, so this one is for US-based makers. If you're elsewhere, the record-keeping habits still apply, but your forms and rules will be your country's own. None of this is tax advice.
If your craft is a business, you report it on a Schedule C, and the good news is that it's friendlier to small makers than it used to be. Most of the advice out there is a list of deductions, which is useful, so we'll get to it. But first the thing that trips people up the most, and that almost no list explains: when you get to deduct what you spent. This is general information, not tax advice, and a good preparer is worth their fee, so treat this as the map, not the territory.
The timing mistake: you don't deduct a stash, you deduct what you use
Here's the trap. You spend $800 on yarn in December, feel clever, and plan to write off the whole $800 this year. But you've only knitted up $200 of it. The instinct to deduct the full purchase is the classic crafter error. The principle is that materials count against your income as they're used in the goods you make and sell, not on the day the receipt printed. A closet full of unused supplies is not a deduction yet. It's just a closet full of supplies.
The friendlier news: small businesses, and nearly every solo maker counts as one, can generally use simpler methods that often let you treat supplies as deductible when they're consumed rather than tracking a formal inventory system. It's simpler than the old way, but the spirit is the same. Match the cost to the work it went into. This is exactly the kind of thing worth one short conversation with a tax pro to set up correctly for your situation, once.
The deductions makers leave on the table
Beyond materials, a lot of legitimate business costs go unclaimed simply because people forget them:
- Mileage to markets, supply runs, and the post office, at the IRS standard mileage rate (it changes yearly, so use the current one).
- Booth, jury, and application fees, plus guild or market memberships.
- Payment processing fees, which quietly add up to a real number over a year.
- Packaging and shipping, bags, boxes, labels, tissue, tape.
- The business slice of your phone and internet, the part you actually use for the business.
- Website, photography props, classes, and business insurance.
The home studio, done right
If you have a space used regularly and exclusively for the business, a spare room that's your studio and not also the guest room, you can take the home office deduction. The simplified method is the easy one: a set rate per square foot, up to a cap, with no receipts to keep. The word that matters is exclusively. The kitchen table where you also eat dinner doesn't qualify, which is the rule people most often wish were different.
When the IRS calls it a business at all
All of this assumes you're running a business, not a hobby, and the difference is whether you're genuinely trying to make a profit. The IRS weighs a handful of factors: do you keep good books, do you depend on the income, do you actually turn a profit in some years. Turning a profit across several years points toward "business," but no single factor decides it. The catch that stings: if it's a hobby, you report the income but generally can't deduct the expenses against it. Running it like a real business, with real records, is what earns you the Schedule C in the first place.
Tax time is only painful when the records are. Keep them as you go and Schedule C is mostly transcription.
Every deduction above depends on one unglamorous habit: writing it down when it happens. Wares maps each expense you log to its Schedule C category as you enter it and adds up your income, expenses, and a quarterly tax estimate, then exports the whole thing as a tidy CSV your preparer will actually thank you for. It's free to try, right in your browser.