The Real Cost of Running a Handmade Business: Taxes & Lessons from Wicked Redhead
Tax season—it’s not exactly the most exciting part of running a handmade business, but it’s definitely one of the most important. As small business owners, my husband and I just wrapped up our taxes for Wicked Redhead, and let’s just say… it was an eye-opening experience.
Whether you’re a fellow maker, an aspiring entrepreneur, or just curious about what goes on behind the scenes, we’re sharing what we learned, the real costs of running a handmade business, and a few tax tips to make your life easier next year!
The Reality of Small Business Taxes
When you run a small business, taxes aren’t as simple as just handing over a W-2 and calling it a day. You have to track every expense, every sale, and make sure you’re setting aside enough to cover your tax bill. Here are a few key things we realized:
✅ Business Expenses Add Up Quickly – Everything from raw materials to website hosting and shipping supplies can be deducted, but you need detailed records to claim them.
✅ Keeping Receipts & Records is a Lifesaver – We used QuickBooks, to track every transaction. This made tax filing MUCH smoother.
✅ Self-Employment Taxes Can Be a Shock – As small business owners, we pay both income tax and self-employment tax (which covers Social Security and Medicare). If you’re new to this, make sure to set aside around 25-30% of your income for taxes!
Key Deductions for Handmade Business Owners
One of the biggest perks of running a business is being able to deduct expenses. Here are some major ones to keep in mind:
🕯️ Supplies & Materials – Wax, fragrance oils, soap bases, jars, wicks, labels—if it’s used to make your products, it’s deductible.
💻 Website & Hosting Fees – Our website runs on Astra theme and Cloudflare, and all those costs count as business expenses.
📦 Shipping & Packaging – If you ship products, all your shipping supplies (boxes, tape, bubble wrap) and postage costs are deductible.
🛍️ Marketing & Advertising – We invest in SEO, social media ads, email marketing (Mailchimp), and branding—all of which help us grow Wicked Redhead and are tax write-offs.
🏡 Home Office Deduction – If you have a dedicated workspace for your business, you may be able to deduct a portion of your rent/mortgage and utilities.
Lessons Learned & Tips for Next Year
✅ Stay Organized Year-Round – Don’t wait until tax season to scramble for receipts. Keep digital records and track everything as you go.
✅ Set Aside Money for Taxes – If you make regular sales, set aside at least 25-30% of your profits for taxes so you’re not caught off guard.
✅ Consider Professional Help – If you’re unsure about anything, a tax professional or accountant can save you moneyand help you avoid costly mistakes.
Final Thoughts
Taxes might not be the most fun part of running Wicked Redhead, but they’re a reality of owning a business. The key takeaway? Stay organized, track your expenses, and plan ahead. We hope sharing our experience helps other small business owners navigate tax season with a little more confidence!
If you’re a fellow maker or small business owner, how do you handle tax season?