Am I reading the proposed legislation correctly? Obviously, it's not passed yet, but it looks like Congress is going to allow taxpayers to deduct expenses for which the PPP loan proceeds were used.
That would result in a huge tax savings if it passes.
Here's a draft of the proposed legislation...
(See page 13)
Solved! Go to Solution.
Drafts are a dime a dozen. This Senate bill won't make it through the House, but they might copy and paste some parts of it. Remember, a second round of $1,200 payments was passed by both houses with bipartisan support -- so of course, it was never reconciled into a bill that made it to the President's desk.
I have not read it but I doubt it. It will be a gift. It the self-employed did not pay for the expenses with a money they have to return, I do not think they are going to allow a double dip deduction. But it will be good for the self employed if they do that. Maybe they are going to allow it to satisfy the business owners that are complaining about the lock down jjjjjj. Nobody knows.
My prediction is that they will allow businesses to deduct the expenses which were paid for with PPP loan proceeds. That will make it into the final version of the bill. And I'll go one further...
At some point in the next couple of months, Congress will also waive the requirement to repay the FICA tax deferral.
So, we'll see. Might even know about the deductibility of the PPP loan expenses this week. Hoping Trump will sign it into law. Fingers crossed.
@Ephesians3-14 Which FICA tax deferral? The one for employers that was legislated, or the one for employees that was created by executive order? Forgiveness of either one has about the same chance as the metaphorical snowball. Too many deficit hawks and protectors of the Social Security accounting system.
Cancelation of Debt is income, not reduction of expenses that debt was spent on. So yes PPP loans that are forgiven would be income to recipient. Which year they are actually forgiven is up for debate. But I doubt expenses can be questioned if forgiven loan is included in income at some point.
Good thing that no 1099-C's will be issued for the PPP Loan forgiveness. That income is not taxable.
Now I hope they allow taxpayers to also deduct the expenses on which the proceeds were used. Stay tuned. Congress will issue a final draft of their bill this week. Then we'll see what the Senate does. Fingers crossed. Would be a nice windfall if they allow those expenses to be deducted.
"So yes PPP loans that are forgiven would be income to recipient."
Nope - IRS already said the loan forgiveness is not income.
"Which year they are actually forgiven is up for debate."
No debate here either - IRS already issued a Revenue Ruling clarifying this issue.