Common categories
USPS postage, FedEx and UPS shipping, courier services, freight charges on inbound inventory, fulfillment center pick-and-pack fees, packaging materials (boxes, tape, labels, void fill), shipping insurance, and tracking services. All deductible as ordinary business expenses.
COGS vs operating expense
For inventory businesses, inbound freight on inventory generally goes into cost of goods sold (Schedule C Part III). Outbound shipping to customers is typically an operating expense (line 22 supplies or line 27 other expenses, often labeled "Shipping & postage"). Larger sellers may use a third-party logistics (3PL) provider whose monthly fee bundles storage, fulfillment, and shipping.
Pass-through shipping
When you charge customers separately for shipping, the amount you collect is gross receipts (income) and the amount you pay the carrier is a deduction. Net to zero on a pass-through basis, but both sides should be tracked for clean reconciliation with 1099-K reporting.
International shipping
Customs duties, import fees, and brokerage charges on inbound goods are part of the cost of inventory (capitalize into COGS). On outbound international shipments, customs paperwork and duties paid by you (rather than by the recipient on a Delivered Duty Paid basis) are deductible operating expenses.
Where it goes
Inbound freight on inventory: COGS Part III. Outbound and operational shipping: Schedule C line 22 ("Supplies"), line 27 ("Other expenses") with a labeled detail, or line 24a / similar — pick a consistent placement.
Common mistakes that disallow the deduction
The recurring ways this deduction gets disallowed in examination cluster in four categories: (1) personal-use expenses bundled with business (the deduction is disallowed entirely or apportioned downward); (2) inadequate substantiation (no receipt, no invoice, no business-purpose note); (3) the wrong line on Schedule C (not fatal, but it weakens audit defense); and (4) double-counting with another line (for example, deducting an expense on Schedule C and also on Form 8829, or as a personal itemized deduction on Schedule A). The fix in every case is contemporaneous bookkeeping and a clean chart of accounts.
Where this fits in the larger Schedule C picture
Schedule C has more than two dozen named expense lines plus an "Other expenses" catch-all. For most small businesses, four or five lines drive the bulk of the deduction total — vehicle, home office, depreciation, contract labor or wages, and supplies — and the remaining lines individually contribute small amounts that nevertheless add up. Treating each named line as a recurring decision rather than an afterthought, and revisiting the categories each January, often surfaces $2,000–$5,000 in additional legitimate deductions that a less disciplined process would have missed entirely.