I think you probably have not received any answers yet because this is a very complex subject. There are several ways to handle your inventory carry costs, and each way may have different tax implications.
I saw an article with information on two popular options.
- Option 1: Adjust the before-tax percentage inventory noncapital carrying costs to an after-tax figure and add this to the after-tax cost of capital.
- Option 2: Convert the after-tax cost of capital to a before-tax number and add it to the before-tax percentage noncapital carrying cost.
You can read the full article by clicking here. It paints a very detailed picture of some of your available options.
Great, thanks for the info.
You are NOT getting taxed more because you have unsold inventory.
Inventory is NOT part of profit until sold.
The success of your business depends upon having the right goods at the right time (inventory)
You have limited cash. Excess inventory ties up cash.
Talk to YOUR accountant.
I'm still getting the hang of this stuff but what ill affects does carrying inventory over from one year to the next year have? From 2010 to 2011 I had some inventory that wasn't sold and was told my taxt bill was substancially higher compared to if I had half the unsold inventory. I'm trying to get grasp on how and why I am getting taxed more because I have unsold inventory, it seems like I am getting taxed twice.