You may deduct your packaging bag business expenses which are the cost of operating a waterproof bag business. If you manufacture products or purchase them for resale, you can deduct the cost of goods sold. The I.R.S website explains how to calculate the deductible cost of packaging bag sold. Other types of business deductions are the expense of using your car in business, salaries and payments to independent contractors, your contribution to employees' retirement plans, rent expense, insurance, and interest on any business loans for waterproof bag . There are additional allowable deductions that you can discuss with your tax professional. From http://www.niceindustry.com/product_.asp Capital expenses are not deductible. You must capitalize, rather than deduct, some capital costs. These costs are a part of your packaging bag investment in your business. There are generally three types of costs you capitalize: going into business, business assets, and improvements. You cannot deduct personal expenses. If you use your Home for your waterproof bag business, you can deduct a prorata share of the expenses you incur on your home. You must file a Form 8829 stating you home's total square feet and the percentage of your home used exclusively for packaging bag business. The Form 8829 instructions explain how to calculate a deduction for your home office.