Can I deduct tariffs and import duties as a business expense in 2025?

Yes — tariffs and import duties paid on goods used in your business are generally deductible, but the method of deduction depends on how those goods are used in your business.

For goods you resell (retail/wholesale businesses):

Tariffs and import duties are treated as part of the cost of goods sold (COGS), not a separate line-item deduction. They are included in your inventory cost and deducted when the goods are sold. On Schedule C (sole proprietors) or the applicable business return, this flows through the COGS section (Line 4 on Schedule C).

For goods used in manufacturing:

Same principle — import duties on raw materials, components, or inputs become part of your cost basis for the manufactured goods. They flow into COGS when the finished products are sold.

For supplies and equipment (not resold):

If you import equipment, machinery, or business supplies for your own use (not for resale), the tariff paid becomes part of the asset's cost basis. You then depreciate that full cost (including the tariff) over time using MACRS depreciation, or you may elect to deduct the full amount immediately under Section 179 or bonus depreciation.

Practical note for 2025:

With broad tariff increases enacted in 2025, many businesses have seen significantly higher import costs. These costs are fully deductible through the mechanisms above — but they can also create cash flow challenges since the deduction may not be realized until goods are sold (which could be months later for inventory).

What you cannot do: You cannot deduct tariffs paid on personal purchases, even if you occasionally use the item for business. The business-use percentage rules apply — only the business-use portion of the cost (including tariff) is deductible.

Documentation: Keep your customs entry forms (CBP Form 7501), commercial invoices, and payment receipts. The IRS may request these if you're audited, particularly for large import deductions.