Dear All,
Any suggestions appreciated. I am starting this new post to better explain the situation. I am self-employ working from home workshop, making titanium items by hand.
I would buy a larger piece of titanium sheet about 12" X 36" cost $100.00. I would have this piece sent directly to my sub-contractor (Laser Cutting Services) and pay them to cut sheet into small patterns. They cut about 200pcs from the 12" X 36" sheet. The cost to cut each piece is $2/ea. 200pcs = $400.00 for laser cutting service.
The $100 material cost, I would input into Business Expense/Supplies. The $400.00 laser cut cost I would input in the Sub-Contractor Expense.
Once I get parts back 200pcs. If 100% successful, I can produce 200 parts. But with handmade, we are human and make mistake. I would hammer by hand (die striking with 4lb hammer) variations of artworks, letter, numbers cut into the surface of titanium piece. If artwork or letters is stamped crooked or off centered, customers would not accept it. Failed piece will go into a scrap bucket. For 2021 I have accumulated roughly 500pcs of fail pieces.
My question is, since for Material i've already input into Business Expense Supplies. How about the loss for Laser Cutting? Every time I make a mistake, it cost me $2 for laser portion. Is this loss tax deductible?