Cottage food taxes: what every home baker needs to file

You owe two taxes most bakers forget

1. Self-employment tax (15.3%) — Social Security + Medicare on net profit.
2. Federal income tax — on net profit, at your bracket.
3. State sales tax — usually NOT owed on cottage food, but check your state.

Deductions you're probably missing

• Ingredients & packaging (100%).
• Mileage to markets and pickups ($0.67/mile in 2026).
• Home office (% of home used for business).
• Equipment (mixer, ovens, scale) — depreciation.
• Cottage food permit, insurance, food handler's card.
• Software (Siftii, accounting).

The quarterly estimated tax rule

If you'll owe >$1,000 in tax, you must pay quarterly estimates: April 15, June 15, Sept 15, Jan 15. Set aside 25-30% of profit.

Simple system

• One business bank account.
• Every receipt goes in one folder/app.
• Use Siftii to track revenue and expenses.
• File Schedule C with your 1040.

Track your expenses in Siftii →