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.

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. Thanks for any help!