Question

I use cash method on my tax return, can i deduct all inventory cost at the same tax year of purchase instead of waiting the inventory is sold. If so, should i use the cost of goods sold form, or deduct them as "Other deductions"

Forum|Forum|2 years ago
February 15, 2024
1 reply
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DawnC

If you don't keep an inventory, you can use the Other Deductions category. Do I have to keep inventory?

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R

ron2024Author

Under the cash method, I can deduct inventory as other deductions or "COGS",

Under accual method, i can only deduct inventory as on "COGS",

Am i correct?

R

ron2024Author

A couple of comments regarding your questions:

Accrual method of accounting gives you a better picture of your business; in general, no highs or lows
With the accrual method of accounting, you don't "deduct" inventory. You track beginning inventory, purchases and ending inventory which then results in CGS.
If you are eligible to use the cash method and not track inventory, you would deduct the costs (purchases) as noted by @DawnC either as "other expenses" on line 27a of the Schedule C (assuming you are filing this, however, there is no indication of what software you are using), or you can reflect it on Schedule C Part III on line 36. Using this method you need to also show zero beginning and zero ending inventory.
This is your 3rd post on this question.

Thank you so much! If i cash method, can i still use accual method for inventory only meaning that i will use actual beinning inventory + purchase - actual ending inventory (i don't want to deduct full inventory cost, but i want to cash method for my tax return)