Paycheck Protection Program Loan Forgiveness

The IRS has a little bad news for small firms that utilize the Paycheck Protection Program (PPP) loans: the businesses can’t deduct the expenses that result in forgiveness of the loan.

The stimulus law says that loans forgiven under the Paycheck Protection Program are nontaxable. But it doesn’t note whether expenses that are funded by the PPP loan proceeds (payroll costs, utilities, rent, etc.) are tax-deductible in cases where the loan is forgiven.

The IRS has answered that question in their public guidance: to prevent a double tax benefit, these expenses are not deductible.

You can read the full text of the IRS notice at: https://www.irs.gov/pub/irs-drop/n-20-32.pdf