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Je378
Returning Member

Keeping track of inventory

Keeping track of inventory has me lost. I sell handmade products made from yarn. I understand that I can write off the cost of my materials. But how do I track the cost of yarn when the number of yarn balls used don’t exactly mirror product. Meaning that sometime our use multiple balls of yarn on one product but other times one ball might get me three products that sell at different prices. Can I write off how much I buy in yarn in total against how much profit I make off of the products?

1 Reply
tagteam
Level 15

Keeping track of inventory

You are more likely than not considered to be a small business taxpayer and, as such, are not required to keep an inventory.

 

See https://www.irs.gov/publications/p334#en_US_2020_publink1000313268

 

Consequently, you can deduct the cost of the materials (yarn) you purchase as "supplies".

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