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PPP Loans Will Not Be Tax-Deductible
As discussed during our recent webinar on maximizing Paycheck Protection Program (PPP) loan forgiveness, businesses who receive a loan through the federal PPP will not be allowed to deduct the wages paid using loan proceeds. The Internal Revenue Service (IRS) made this ruling official on Thursday, saying that allowing the loans to be tax-deductible would create a "double tax benefit" for recipients.
Wages are typically a deductible expense. But the PPP loans are forgivable, as long as they are used for allowable costs like payroll and utilities. While forgiven debt usually counts as taxable income, PPP loans will not be treated as tax-exempt. T he IRS invoked Section 256 of the tax code, which states that deductions can't be taken if they are tied to a certain class of tax-exempt income.
If you have questions about the Paycheck Protection Program and how your business should be accounting for the loan proceeds, please call Gray, Gray & Gray at (781) 407-0300.
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