Are PPP Loan Expenses Tax-Deductable?
The IRS is giving guidance on the Payroll Protection Program loan expenses and the deduction treatment in question. On April 30th, the IRS released guidance announcing that expenses relating to Paycheck Protection Program forgivable loans will not be tax-deductible.
Cares Act and Payroll Protection Program Loan Expenses
The Paycheck Protection Program was originally created as part of the CARES Act, a $2.2 trillion coronavirus relief bill. The program provides low-interest loans to small businesses that will be forgivable as long as the funds go toward essential expenses such as maintaining payroll.
The initial subsidy of $349 billion ran out quickly, and a second-round was passed as part of the PPP & HCE Act. The Paycheck Proction Program and Health Care Enhancements Actic is providing $310 billion in additional funds.
Are Wages Deductable Under the Coronavirus Relief Packages?
Under normal circumstances, wages would be deductible expenses for employers, and forgiven debt would count as taxable income. Under the coronavirus relief packages, however, PPP loan forgiveness will not count as taxable income. Therefore the PPP loan expenses will not be deductible.
That being said, the IRS guidance states that expenses that result in forgiveness of a Payroll Protection Program loan are not tax-deductible in order to prevent a “double tax benefit.”
If they decide to take action on this topic, Congress could override the IRS’s guidance by passing a law that would explicitly allow the deductions.
Do you have questions regarding the PPP Loan Expenses and Conditions?
Either Alex Franch or one of our colleagues will continue to keep you updated on the latest IRS guidance and other PPP news and legislation. You can call Alex Franch at 781-849-7200 or email him at email@example.com to schedule an appointment to drop off you tax documents at either our Norwell, Massachusetts Tax Office or Dedham, Massachusetts Tax Office locations. Tax time has been extended to July 15, 2020, yet, “why wait?” Go online and schedule your appointment now. You may also securely upload your encrypted tax documents below. Stay safe, and remember to wear your mask whenever social distancing is not possible.