No deductions for expenses paid by PPP debt that is forgiven - Spidell

No deductions for expenses paid by PPP debt that is forgiven


As anticipated, the IRS has issued guidance stating taxpayers may not deduct expenses that were paid by Paycheck Protection Program loans, if the payment of the expenses results in loan forgiveness under the program. (IRS Notice 2020-32) Loan forgiveness is available under the program for the following expenses paid and incurred during the eight weeks after the borrower receives their funds:

  • Payroll costs;
  • Mortgage interest;
  • Rent; and
  • Utilities.

Under the Internal Revenue Code, taxpayers are precluded from claiming deductions paid with exempt income. Because PPP loan forgiveness is excludable from taxable income under the CARES Act, taxpayers may not claim deductions for these expenses.

The Notice is available at:

www.irs.gov/pub/irs-drop/n-20-32.pdf

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