reselling online donation deductions

[jtomeldan]

i have a small business reselling online and would like to know where do i list the unsold items that i have donated to charity? I have removed them from the inventory, $2900.00 worth at FMV following It's Deductible, but would like to record the value as a deduction for the business.  Where do i record this?  I entered it on the personal side in charitable donations, however I will file with the standard deductions.  So where do i record all my donated unused inventory for 2021?

[LeonardS]

If you are a sole proprietor and you make a donation, of unused inventory, to a charity you cannot deduct this contribution on Schedule C. It is not a business expense the deduction is listed as an itemized deduction on Schedule A of your tax return.  

The only entity able to deduct a cash charitable contribution as a business expense is a C Corporation.

[jtomeldan]

Thanks for your response Leonard.  Would I be able to deduct the cost of these items under business expenses as unsold / damaged inventory?  I'm assuming/hoping they are deductible somewhere as an expense...

[LeonardS]

Yes, you can account for the value of damaged inventory.  The actual cost of damaged inventory reduces the value of ending inventory. Rather than taking a direct deduction for written-off inventory, you use Schedule C to factor the loss into your COGS. You report your beginning inventory, purchases and direct costs on Part III of Schedule C. After subtracting your ending inventory, the result is the cost of goods sold. A lower ending inventory value gives you a higher COGS and thus a lower gross profit. Your gross profit is normally the main determinant of your net income and tax obligation, so damaged inventory reduces your tax bill.