How to separate business & personal items from grocery receipts?

[yres27]

I'm a cottage food baker & fairly new to it so I'm filing taxes based on last year. I didn't realize I should've kept personal grocery items & baking items separate purchases or this would be a lot easier on me!

How do I go about separating my personal items from receipts to enter the amount of what I actually use to bake with in the deductions for my taxes?

Will adding up the cost of each item be enough? Do I need to find the sales tax of each item & add that in as well?

[MindyB · Accepted solution]

Yes, going forward, it will simplify your record-keeping to always separate business and personal purchases.

If you want to deduct the sales tax, then yes, you will need to compute that as well. ‌You aren't required to do this, it would only benefit you by increasing the cost of your baking supplies.  Depending on the state you live in, it might not be material to you if groceries aren't taxed.

Here is an article you may find helpful: Reporting Self-Employment Business Income and Deductions

[yres27]

Thank you so much! I live in Illinois so it looks like 1% tax on food?

[MindyB]

You are welcome.  Yes, Illinois currently taxes food (until 1/1/26), so make sure to include that 1% tax. ‌I would suggest using a spreadsheet for this and adding a column for sales tax.

‌Additionally, if you bought bakeware not used for your family, or anything else for the business, include that in your expenses. Those items have a higher tax rate for non-food items of 6.25% which you can deduct, too.

[yres27]

Yes! I've included baking & packing supplies already. Thank you so much, I appreciate your help.