Who this is for
You're making sales on Etsy. Revenue is coming in. But when you check your bank account, the numbers don't match what you expected.
Know your real Etsy profit margin
Factor in materials, labor, packaging, and all fees to see actual profit.
Most Etsy sellers overestimate profit by 30–40% because they only subtract the obvious costs. They forget labor, packaging, taxes, and the hidden fees that pile up. If you've never calculated your true profit per item, you're probably running leaner than you think.
The goal
Know your actual profit per item, not just revenue minus Etsy fees. You need to account for every cost that goes into making, listing, and shipping your product. Only then can you price intelligently and identify which items are actually worth your time.
Quick summary
Here's what happens to a $30 sale on Etsy:
| Line Item | Amount |
|---|---|
| Sale Price | $30.00 |
| Materials | -$8.00 |
| Labor (30 min @ $12/hr) | -$6.00 |
| Packaging | -$2.00 |
| Etsy fees (listing + transaction + payment) | -$3.30 |
| Profit (before tax) | $10.70 (35.7%) |
| Self-employment tax (15.3%) | -$1.64 |
| Profit (after tax) | $9.06 (30.2%) |
That $30 sale becomes $9 in your pocket. Not $30. Not even $20.
This quick summary excludes shipping costs to show base profitability. The detailed breakdown below includes shipping — where the real margin drops to 13.3%.
Use the Etsy Profit Calculator to run your own numbers instantly.
Revenue is not profit
Revenue is what customers pay you. Profit is what you keep after every cost is paid.
The difference matters because you can have high revenue and still lose money. A $50,000 Etsy shop sounds impressive until you realize $48,000 went to costs. That's $2,000 profit for a year of work.
Track profit per item, not total sales. Revenue is a vanity metric. Profit is what pays your bills.
Know your real Etsy profit margin
Factor in materials, labor, packaging, and all fees to see actual profit.
Every cost you need to include
Materials
Everything that goes into the physical product. Fabric, beads, paint, clay, wood, findings, adhesives, finishes. If it's consumed in production, it counts.
Buy in bulk to reduce per-unit cost, but track your actual usage. A $50 spool of wire might make 100 items, so each item carries $0.50 in material cost.
Labor
Your time is a cost, even if you don't cut yourself a paycheck. Track every hour spent on design, sourcing, production, photography, listing creation, customer service, and order fulfillment.
Pay yourself a realistic hourly rate. $12–20/hour is common for production work. If you spend 30 minutes making a bracelet at $12/hour, that's $6 in labor cost. Ignore this and you're working for free.
Packaging
Boxes, tissue paper, stickers, tape, bubble wrap, thank-you cards, branded inserts. These add up fast.
A "nice" unboxing experience can cost $1–3 per order. Budget packaging adds charm, but premium packaging eats profit. Track what you actually spend, not what you wish it cost.
Shipping
You charge customers for shipping, but you also pay for shipping supplies that aren't covered by that fee. Labels, poly mailers, packing tape, printer ink.
Separate shipping supplies from the shipping cost itself. If you charge $5 for USPS First Class but spend $1.50 on mailers and labels, that $1.50 is a cost against profit. See our Etsy shipping fees guide for carrier rates and discounts.
Etsy fees
As of 2026, Etsy charges:
- Listing fee: $0.20 per item
- Transaction fee: 6.5% of the total sale price including shipping
- Payment processing: 3% + $0.25 per order (US rates)
- Offsite Ads (if applicable): 12% for sellers over $10K/year (mandatory), 15% for sellers under $10K (optional)
For a $30 item with free shipping: $0.20 + $1.95 + $1.15 = $3.30 in Etsy fees.
If Offsite Ads triggered the sale, add another $3.60 (12%) or $4.50 (15%). That changes the math entirely. For a full walkthrough, see our Etsy fee calculator guide.
Marketing (ads)
Running Etsy Ads? Track your daily budget and divide by sales. If you spend $5/day and make 10 sales, that's $0.50 ad cost per sale.
Offsite Ads are automatic and non-optional once you hit $10K in sales. Budget for them even if you're not there yet.
Taxes
Self-employment tax is 15.3% on net profit over $400/year. This covers Social Security and Medicare. It's separate from income tax and often surprises new sellers.
If you owe more than $1,000 in annual taxes, the IRS requires quarterly estimated payments. Miss those and you'll owe penalties. Sales tax is handled by Etsy in most US states under marketplace facilitator laws, but you're still responsible for income and self-employment tax.
The $30 bracelet: full cost breakdown
Let's walk through a real example. You sell a handmade beaded bracelet for $30 with free shipping.
Sale price: $30.00
COSTS:
Materials (beads, elastic, findings) -$8.00
Labor (30 min at $12/hr) -$6.00
Packaging (box, tissue, sticker) -$2.00
Shipping (USPS First Class) -$4.50
Shipping supplies (mailer, label) -$1.50
Etsy listing fee -$0.20
Etsy transaction fee (6.5%) -$1.95
Etsy payment processing (3% + $0.25) -$1.15
--------
Profit (before tax): $4.70 (15.7%)
Self-employment tax (15.3% on profit) -$0.72
--------
Profit (after tax): $3.98 (13.3%)
You made $3.98 on a $30 sale. That's a 13.3% margin after taxes. If you sold 100 of these, you'd net $398, not $3,000.
Profit margin benchmarks for Etsy sellers
What's a good margin? It depends on your business model and goals.
10% margin = average. You're covering costs but not building much cushion. One bad month and you're in the red.
20% margin = good. This is the target for most successful Etsy sellers. You're profitable, can reinvest in inventory, and have breathing room for slow periods.
30%+ margin = excellent. You're running a tight operation with strong pricing. This leaves room for scaling, experiments, and weathering downturns.
Many handmade sellers aim for 20–50% margins. Digital products (printables, patterns) can hit 70–90% since there's no material or labor cost per unit. For a deeper analysis, see our Etsy profit margins guide.
When a product isn't worth selling
If your margin drops below 15%, the product is barely worth your time. One shipping error, one customer dispute, one defect and you're losing money.
Low-margin items also have hidden costs. They tie up inventory, slow down production, and distract from higher-margin products. Opportunity cost matters. Every hour spent on a $4 profit bracelet is an hour you didn't spend on a $15 profit item.
Red flags:
- Margin under 15% (too fragile)
- Labor time exceeds profit (you're paying to work)
- Materials cost more than 40% of sale price (pricing too low or sourcing too expensive)
- Frequent defects or returns (quality issues eat profit fast)
Kill products that don't pull their weight. Focus on what actually makes money.
How to improve margins without raising prices
Raising prices works, but it's not the only lever. Here are five ways to boost profit without touching your price tag.
Buy materials in bulk. A single skein of yarn costs $8. A 10-pack costs $60. That's $6/skein instead of $8. Do this across all materials and you save 20–30% on cost of goods.
Reduce production time. Make items in batches. Cut all pieces at once, assemble line-style, photograph in sets. Shaving 5 minutes off production saves $1 per item at $12/hour.
Negotiate shipping rates. Once you ship 50+ packages a month, commercial shipping discounts kick in. Pirate Ship and ShipStation offer discounted USPS rates. Save $0.50–1.50 per shipment.
Simplify packaging. Customers care about the product, not the tissue paper. Test cheaper packaging and see if it impacts reviews. A $0.50 savings per order adds up fast.
Optimize listing photos. Better photos increase conversion, which spreads fixed costs over more sales. Higher sales volume improves margin efficiency.
The tax trap
Self-employment tax catches new sellers off guard. It's 15.3% of your net profit, and it applies to any Etsy seller who nets more than $400 in a year.
This is separate from income tax. You pay both. If you're in the 12% income tax bracket and made $10,000 profit, you owe:
- Self-employment tax: $1,530 (15.3%)
- Income tax: $1,200 (12%)
- Total: $2,730 (27.3% of profit)
That $10,000 becomes $7,270 after taxes. If you didn't budget for this, you'll owe the IRS money you already spent.
Set aside 25–30% of profit for taxes. Open a separate savings account and transfer money after every sale. When quarterly tax deadlines hit (April 15, June 15, Sept 15, Jan 15), you'll have cash ready.
FAQ
What is a good profit margin on Etsy?
20% is good. 30%+ is excellent. Anything below 15% is risky because one mistake wipes out your profit. Handmade sellers typically target 20–50%, while digital product sellers can hit 70–90% since there's no per-unit production cost.
How do I calculate Etsy profit?
Sale price minus all costs: materials, labor, packaging, shipping supplies, Etsy fees, ads, and taxes. The formula: Profit = Sale Price - (Materials + Labor + Packaging + Shipping + Etsy Fees + Ads + Taxes). Track every cost.
Does an Etsy profit calculator include fees?
A proper calculator includes listing fees ($0.20), transaction fees (6.5%), payment processing (3% + $0.25), and Offsite Ads (12–15% if triggered). Our Etsy Profit Calculator covers all of these.
How much do Etsy fees cut into profit?
For a $30 item, Etsy fees total about $3.30 (11% of the sale). If Offsite Ads apply, add another $3.60–4.50, bringing total fees to 23–26% of revenue. That's before materials, labor, or taxes.
Should I include my time as a cost?
Yes. Your labor has value. If you don't pay yourself, you're working for free. Use a realistic hourly rate ($12–20/hour for production work) and track every hour spent on design, production, photography, listing, and customer service.
What if my margins are too low?
You have three options: raise prices, reduce costs, or stop selling that item. Raising prices is fastest. Reducing costs (bulk materials, faster production) takes time but preserves price point. Killing low-margin products frees time for better opportunities.
Do I need to pay quarterly taxes on Etsy income?
If you expect to owe more than $1,000 in taxes for the year, the IRS requires quarterly estimated payments (April 15, June 15, Sept 15, Jan 15). Miss these and you'll owe penalties. Track profit monthly and pay quarterly to avoid surprises.
How does self-employment tax work for Etsy sellers?
You pay 15.3% on net profit over $400/year. This covers Social Security and Medicare. It's in addition to income tax. For example, $10,000 profit means $1,530 in self-employment tax plus income tax based on your bracket.
Next steps
- Run your numbers — Use the Etsy Profit Calculator to see what you actually keep per sale
- Calculate fees first — The Etsy Fee Calculator shows exact fee breakdowns for any price
- Understand every fee — Etsy Fees Explained covers the complete fee structure
- Improve your margins — Our Etsy Profit Margins guide covers pricing strategies and markup formulas
- Budget for launch — If you're just starting, review Etsy Startup Costs for launch expenses
- Generate optimized listings — Use the AI Listing Generator to create titles and descriptions that convert
Know your real Etsy profit margin
Factor in materials, labor, packaging, and all fees to see actual profit.
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