I had an online business for 3 years. I got help for the first year with COGS and inventory and all that, but decided to close this year. I have a lot of leftover fabric that I will mostly use for personal projects, and stumped trying to figure out how to put it on my schedule C. I've read a lot of conflicting information, and want to be sure I do it right.========> There is no tax advantage to keeping an inventory that is necessary for the business purpose.leftover inventory items are not a tax deduction until the inventory items are sold, or deemed ?worthless? and removed from the inventory. You have to report it as "removed for personal use". Report all that is left so that your EOY inventory balance for 2018 is zero. If it's not zero, then as far as the IRS is concerned, you're not completely closed and they will be expecting a Sch C from you next year.
For now, I have my beginning inventory from last year's end on line 35 (about $1500). I have my purchases for this year calculated out, and put the total of all my leftover inventory as a negative number subtracted from the purchases ($110- $1200 total leftover inventory). So now, I have a negative number, then I add labor ($0), Materials ($70), other costs ($300) and add everything to get around $800 for COGS- using rough numbers for example.
Is that the right way to do it, or should I be taking that $1200 of leftover inventory and writing it off somewhere else? My husband says I should write it off as a loss to get a bigger tax break, but not sure that is the correct way to do it==>>As mentioned above.