IRS: Expenses Paid with Forgiven PPP Loans are Not Tax Deductible
The Internal Revenue Service on April 30 issued guidance that states that employers who received loans through the Paycheck Protection Program (PPP) will not be eligible for tax deductions on expenses if payment of those expenses funded by the loan results in the loan being forgiven.
Specifically, IRS Notice 2020-32 provides guidance regarding the deductibility for federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s trade or business when the taxpayer receives a loan pursuant to the PPP. The notice clarifies 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 the loan.
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