PPP Loan Expenses Not Deductible

On November 18th, additional guidance on the Paycheck Protection Program loan expense deductibility was released by the IRS.

A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year. https://www.irs.gov/pub/irs-drop/rr-20-27.pdf

Therefore, for most taxpayers, this means the expenses will not be deductible for the 2020 tax year. Lobbyists are still pushing for the next stimulus package to include guidance that allows the PPP loan expenses to be deductible. However, results of their efforts may not be known until early 2021.

We will continue to monitor and keep you updated as additional information and guidance is released. If you have any questions or concerns, please contact us at 517.323.7500 or send us an email at maner@manercpa.com.