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Inventory Tax Tip


When speaking to shop owners around the country, the issue of inventory often comes up. What to stock, what not to stock, is a common question. Some shops are located in rural areas and many are located within minutes of a parts house. So, deciding how much inventory you stock depends on your particular situation.


One thing to consider, if having additional inventory helps increase production, (batteries, belts, air filters, cabin filters, oil filters, wiper blades, etc.) it may be a good idea to stock these fast movers. Increasing production will pay for itself, plus you may be able to negotiate a better price with your supplier when you stock these items.


As far as taxes are concerned, inventory falls under the expenses category until you actually sell it. Inventories are unused assets that are tax deductible. There are different types of inventory eligible for deduction. Parts and material you stock are eligible. It is important that you take an accurate count and do not estimate your inventory. Before you do your tax return this year, perform an accurate inventory count and speak to your accountant.



At my shop we have an Inventory Party. We ask for a few volunteers to stay for an hour or so after work and either order in food or I take the guys to Chili’s or another local restaurant. Food is a powerful motivator.

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