When are the 2026 estimated tax payments due?

April 15, June 15 and September 15, 2026, and January 15, 2027. If you missed earlier ones, pay as soon as you can; the penalty is figured on each underpaid installment for the days it's late.

Can a maker deduct all materials bought this year?

Not necessarily. Materials and outsourced production are cost of goods sold, deducted as items sell: beginning inventory plus purchases minus ending inventory, so count inventory at year end. Tools and equipment aren't materials; items of $2,500 or less can be expensed under the de minimis safe harbor.

Can I take a home office deduction for crafting at home?

Yes, for space used regularly and exclusively for the business, such as a workroom or stockroom. The simplified method allows $5 per square foot for up to 300 square feet ($1,500); the regular method allocates actual home costs. A shared living or dining area doesn't qualify.

Etsy Sellers: Quarterly Taxes and Deductions

Q: Do all Etsy sellers have to pay quarterly estimated tax?

Only if you expect to owe $1,000 or more in federal tax after withholding. Paying 100% of last year's tax (110% if last year's AGI was over $150,000) or 90% of this year's avoids the penalty. If you or your spouse has W-2 wages, extra withholding on a new W-4 can replace estimates.

Etsy collects sales tax but doesn't withhold income tax for you. If you expect to owe $1,000 or more in federal tax for the year, pay estimated tax quarterly: for 2026 the dates are April 15, June 15, September 15 and January 15, 2027. Paying 100% of last year's tax (110% if last year's AGI was over $150,000) or 90% of this year's avoids the underpayment penalty. Before you estimate, get your deductions right: materials and inventory run through cost of goods sold, and Etsy fees, shipping labels, tools up to $2,500 each and a home office are deductible.

Why Etsy sellers get surprised in April

An employee's paycheck has tax withheld every pay period. Etsy deposits don't. What lands in your bank is sale proceeds net of platform fees; income tax and self-employment tax are yours to pay.

The one first-year sellers miss most is self-employment tax. A business-run Etsy shop pays 15.3% for Social Security and Medicare on top of income tax, figured as net profit × 92.35% × 15.3% (the Social Security part stops at $184,500 for 2026). On $20,000 of net profit that's about $2,826 before any income tax, and paying it all in April can come with an underpayment penalty.

Who has to pay quarterly estimates?

The rule: if you expect to owe $1,000 or more in federal tax after withholding and refundable credits, you need to pay estimated tax. You avoid the underpayment penalty if you pay either:

90% of this year's tax, or 100% of last year's tax, rising to 110% if last year's adjusted gross income was over $150,000 ($75,000 if married filing separately). A U.S. citizen or resident who had no tax liability for a full prior year generally owes no penalty this year either.

In a first year, when income is hard to predict, paying 100% or 110% of last year's tax is the safest route: last year's figure is fixed, no penalty applies however much you earn, and any balance is paid with the return in April.

Due dates for 2026

First payment April 15, 2026; second June 15; third September 15; fourth January 15, 2027. Pay through IRS Direct Pay, EFTPS or your IRS online account, choosing 1040-ES estimated tax.

It's November now, so three payments have passed. If you missed them, paying more with the fourth installment reduces the penalty, which works like interest on each missed installment for the days it's late. If most of your income came in the fourth quarter, as it often does for Etsy's holiday season, the annualized income method on Form 2210 matches the required payments to when you actually earned the money, lowering the earlier ones.

With a W-2 job, a new W-4 beats estimates

If you or your spouse has W-2 wages, give the employer a new W-4 with extra withholding per paycheck on line 4(c). Withholding counts as paid evenly through the year, so even extra withholding that starts in December covers the earlier quarters. It's the easiest way to fix missed payments.

North Carolina

North Carolina's 2026 individual rate is 3.99%. If you expect to owe $1,000 or more in North Carolina tax after withholding, pay state estimates on Form NC-40 on the same dates as federal. Other states have their own rules.

Get the deductions right before you estimate

Estimates follow profit, and overstated profit means money parked with the IRS. These are the deductions makers miss most often.

Cost of goods sold and the year-end count

Materials, outsourced work and production partner printing are cost of goods sold, deducted as items sell: beginning inventory + purchases − ending inventory. So count inventory on December 31: raw materials, work in progress and finished goods, at cost, with photos. A small business whose average gross receipts over the prior three years are $32,000,000 or less (2026) can use a simplified inventory method and skip uniform capitalization; your own labor isn't added to inventory cost.

Etsy's fees

Listing, transaction and processing fees, Offsite Ads, Etsy Ads, an Etsy Plus subscription and labels bought on Etsy are all deductible. Etsy deposits the net, so pull the fees out of the monthly payment account statement rather than missing them.

Tools and equipment: the $2,500 de minimis safe harbor

Sewing machines, laser cutters, 3D printers, kilns and computers costing $2,500 or less per invoice or item can be expensed in the year bought under the de minimis safe harbor, with an election statement attached to the return each year. More expensive items are depreciated or expensed under Section 179. Buying equipment you need before year end brings the deduction into this year; buying things you don't need just to save tax doesn't pay.

Home office

Space used regularly and exclusively for the business, such as a workroom or a stockroom, qualifies. The simplified method is $5 per square foot for up to 300 square feet, a $1,500 maximum; the regular method allocates rent or mortgage interest, utilities, insurance and depreciation. Inventory storage space has a looser exclusive-use test. The dining table doesn't count.

Others that get missed

Packaging, photo props, design software, font and stock licenses, craft fair booth fees, classes, the business share of phone and internet, and mileage to buy supplies or ship packages, with a log.

Example: how much for the fourth installment?

Example (hypothetical numbers, to show the method): Ms. Zhou is single with no other job and sells handmade candles on Etsy. Her 2025 federal tax was $3,000 and her AGI was under $150,000. She made no estimated payments for the first three 2026 quarters. In November she projects the year: gross receipts $52,000, cost of goods sold $14,000, Etsy fees, labels and other expenses $12,000, net profit $26,000.

SE tax: $26,000 × 92.35% × 15.3%, about $3,674. Income tax: net profit less half the SE tax (about $1,837) gives AGI of about $24,163; less the 2026 single standard deduction of $16,100 leaves $8,063; the QBI deduction is capped at 20% of that, about $1,613; taxable income of about $6,450 at 10% is about $645. Total federal tax is about $4,319.

Safe harbor: 100% of last year's tax is $3,000, or $750 per quarter. She paid nothing for the first three, so the penalty runs on each missed $750 for the days it's late. Paying the full $3,000 by January 15 meets the safe-harbor total, leaving only the interest-like charge on the late installments, which is modest; the remaining $1,319 or so is paid with the return by April 15, 2027, penalty-free. For 2027 she schedules four payments based on her 2026 tax.

A year-end checklist

Count inventory on December 31; download the full year of Etsy payment account statements and order reports; gather supply and equipment invoices; measure the workspace; figure the year's profit and tax once; pay the fourth installment by January 15, or have a spouse with wages update the W-4.

For hobby vs. business, 1099-K reconciliation and whether to form an LLC or elect S corp, see our Etsy seller guide; for the full estimated-tax rules and penalty math, see the estimated tax guide. Book a 15-minute free consultation or WeChat YCLUSA.