Expenses used for PPP loan forgiveness: Deductible or not?

Expenses used for PPP loan forgiveness: Deductible or not?

• Business
• December 04, 2020

While the CARES Act excludes the loan forgiveness from gross income, it does not specifically address whether the expenses used to achieve the loan forgiveness would continue to be deductible. On April 30, 2020, the IRS issued Notice 2020-32 to provide guidance regarding the deductibility for federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s trade or business that the taxpayer uses to support loan forgiveness.

The notice states that no deduction is allowed under the Internal Revenue Code for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan because the income associated with the forgiveness is excluded from gross income for purposes of the Code under CARES Act Section 1106(i). 

https://www.thetaxadviser.com/news/2020/dec/expenses-used-for-ppp-loan-forgiveness-deductible-or-not.html