topic Disposing of unsalable inventory in Deductions & credits

Disposing of unsalable inventory

AKChui — Wed, 11 Feb 2026 08:58:26 GMT

Like all small businesses I've collected unsalable inventory--soiled, damaged, outdated, etc. I understand I can write these off via COGS, but then TurboTax expects I've reduced my inventory by selling the items (and producing an income from them).

How do I write off these items without the expectation that they were sold?

Re: Disposing of unsalable inventory

PatriciaV — Thu, 11 Apr 2024 17:59:44 GMT

Yes, the write-off of inventory is handled through the calculation of Cost of Goods Sold by reducing the ending inventory. If you have no income, this adjustment becomes a business loss.

Re: Disposing of unsalable inventory

AKChui — Thu, 11 Apr 2024 18:34:08 GMT

But in a small business, after the usual deductions, won't this sudden large business loss be interpreted as trying to reduce my personal income taxes and trigger an audit?

Re: Disposing of unsalable inventory

ThomasM125 — Fri, 12 Apr 2024 02:34:49 GMT

No one could know with any certainty if a larger than normal business deduction would invite enhanced scrutiny by the IRS. However, it is not appropriate to pick and choose what deductions to enter for your business, you should report the loss in devaluation of inventory if that is what happened. If the IRS should inquire about it, just have records available to substantiate the loss.

Re: Disposing of unsalable inventory

Brandenbug — Fri, 13 Mar 2026 20:36:01 GMT

Where do I go to do that???? Directions please please please

Re: Disposing of unsalable inventory

MarilynG1 — Fri, 13 Mar 2026 21:57:28 GMT

In the Income section, under Self-Employment, EDIT your Business. Make sure you indicated that your business has an Inventory in 'Tell us More About Your Business'. You're then asked 'How do you Account for your Inventory?'

You're then asked for the value of your inventory at the beginning of 2025, and at the end of 2025, and on the next screen enter the amount of 2025 purchases, and value of unsalable inventory as 'Withdrawn for Personal Use'.

When you remove items for personal use or because they are unsalable, you must remove their original cost from your purchases or inventory value.
Items withdrawn for personal use are not deductible, nor is the "lost revenue" from not selling them.

@Brandenbug