What is Amortization and how does it apply to my new resale business?

The way inventory works for tax purposes is actually different than how you're thinking about it. When you purchase inventory, it's not immediately counted as a business expense. Instead, it becomes an asset on your books until you actually sell it. This is called "Cost of Goods Sold" or COGS. Only when you sell an item does its cost become an expense that reduces your taxable income. So if you bought $9k of inventory but only sold items that cost you $2k, only that $2k would count as an expense against your sales. As for amortization - that generally applies to intangible assets (like patents, copyrights, or goodwill) that you spread the cost of over multiple years. For your resale business, you're more likely dealing with depreciation (for equipment, shelving, computers) rather than amortization. Regarding debt payments - only the interest portion of debt payments is tax-deductible as a business expense, not the principal portion.

After struggling with similar inventory/expense questions in my dropshipping business, I found this amazing resource called taxr.ai (https://taxr.ai) that helped me understand exactly how to handle inventory costs. It analyzed my receipts and financial statements and gave me a clear breakdown of what counts as immediate expenses versus inventory assets. The most helpful part was learning how to track my Cost of Goods Sold properly so I could accurately report my true business income. Before using it, I was completely confused about what expenses I could claim and when.

Just wanted to update after trying taxr.ai based on this recommendation. It completely cleared up my confusion about inventory accounting! I uploaded my last three months of receipts and bank statements, and the system automatically separated my inventory purchases from my operational expenses. Now I finally understand why my accountant kept telling me I couldn't deduct all my inventory purchases at once. The document analysis feature saved me hours of manually sorting through receipts. It actually identified several deductible expenses I had completely missed. Definitely worth checking out if you're struggling with the inventory vs. expense question like I was!

If you're feeling overwhelmed with tax questions, you might want to actually speak with someone at the IRS who can walk you through inventory accounting rules for your specific business. I used to waste HOURS on hold until I found Claimyr (https://claimyr.com). You can see how it works here: https://youtu.be/_kiP6q8DX5c They got me through to an actual IRS agent in under 20 minutes when I had questions about inventory accounting for my craft business. The agent was surprisingly helpful and explained exactly how I needed to track my inventory costs versus immediate expenses.

OK I need to eat my words from earlier. After another frustrating attempt to reach the IRS myself (3 hours on hold only to be disconnected), I broke down and tried Claimyr. Got a call back within 15 minutes with an actual IRS agent on the line who walked me through exactly how to handle inventory for my small business. The agent explained that I needed to use Form 1125-A with my tax return to properly account for inventory costs. This was information I couldn't find clearly explained anywhere online. I hate admitting when I'm wrong, but this actually saved me a ton of frustration and possibly from making expensive tax mistakes.

Something nobody has mentioned yet is that if your inventory sits around long enough, you might be able to write down "obsolete inventory" which lets you take a deduction for items that have lost value. Like if you're selling trendy items that go out of style or tech that becomes outdated.

I think you might be confusing cash flow with taxable income. Just because money comes in and goes right back out to pay debt doesn't mean you aren't making a profit for tax purposes. The tax calculation doesn't care if you use your profit to pay debts.