Not exactly. In 2024, you will deduct the cost of your trinket which will reduce income received from other sales in 2024. In 2025, you will report the income from your sale, however you already deducted the cost of the trinket in 2024 so the full sales price of $20 will be income. Also, in 2025, you will deduct your cost of all trinkets purchased regardless if they were sold in 2025. In the end it equals out.
Each tax year you are required to report all income received, period. You never report the 'profit' portion only in any tax year. It doesn't matter when you purchased your trinkets that you sold in 2025. You deduct all expenses for the trinkets you purchased in 2024, regardless of when they sold.
In tax year 2024 you will report all income received and you can deduct all of your cost of products purchased for sale regardless if they were sold. Same for 2025 and each new tax year.
Under the current tax law, you aren't required to actually enter inventory. It's important for you to track your profit per item as a business, however, as indicated earlier, you are not required to use inventory for your business. You can enter your purchases as materials or supplies on your Schedule C. It can be confusing.
@OneSmallBlonde
[Edited: 02/12/2025 | 10:11 AM PST]
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