Do Your Etsy 1099 Tax Filing With This Guide (2024)

Etsy income tax for self-employed sellers

Etsy sellers pay income tax on their total taxable income, which applies to both full-time and part-time sellers. The only difference between full-time and part-time sellers is that part-time sellers can't lower the income tax they owe using business deductions.

The amount of income tax you pay depends on your tax bracket, and the more you earn, the more you'll have to pay in taxes. You can use this tax bracket calculator to find your rate.

Self-employment taxes for Etsy sellers

Most Etsy sellers are listed as sole proprietorships and have to pay the SECA (Self-Employment Contributions Act) taxes, which are 15.3% of their taxable income. W-2 employees pay half of this (7.3%), because their employer pays the other half. In a self-employed Etsy seller's case, however, both the employer's and the employee's parts come out of the seller's pocket. But there's a plus side. You can deduct one-half of the SECA tax from your taxable income. SECA tax comprises 12.4% for Social Security tax and 2.9% for Medicare tax.

Sales tax for Etsy sellers

Sales tax can get a bit confusing because it is different for every state, with some states charging it and others not. Where there is a sales tax, it's paid on each item sold on Etsy and has to be collected from buyers. In some cases, Etsy will directly collect sales tax and pay it to the relevant states. In other cases, you'll have to factor in sales tax on your products and pay it to your state yourself.

The easiest way to determine whether you need to pay sales tax in a particular state is to clarify the economic nexus, a company's or individual business person's revenue/sales in a particular state. You also need to know what US state your physical presence is in, for example what state you have employees or an office in. In most states, you don’t have to pay sales tax if your annual sales were below $100,000. And if you are physically present in one of the five states that doesn't charge sales tax, you don't have to pay sales tax, no matter what your annual sales are. But, if you're physically present in a state that does charge sales tax, and you have earnings of $100K or more, you'll have to collect sales tax from your customers. If this sounds confusing, you can download the FlyFin app and let A.I. find every possible tax deduction, including business deductions. The app also offers 24/7 expert CPA 1099 tax support, ensuring 100%-accurate tax returns.

Part-time Etsy selling as a hobby

Someone selling for hobby purposes doesn't operate as a business or have regular average sales. Instead, they sell items every once in a while or have a cap on their output because of time constraints or other commitments.

Income from a hobby sale on Etsy is also taxable, but since it's not considered business income, you have to report it using the "Other Taxable Income" box on Form 1040. Also, you can't deduct business expenses from your taxable income since it's not business income.