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Expenses paid with PPP funds

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What can anyone tell me about deductability of expenses paid with money from PPP loans.  It's my understanding that as it stands now, no deductions for 2020 expenses covered by PPP money (even if loan is forgiven it's a separate thing.)  I know many have hoped this would be addressed.  Can anyone tell me the status - whether deductions are dis-allowed if paid with PPP money?

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8 Replies 8
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Level 15

As of 11.12.20 - the expenses are not deductible.  Whether they are *not deductible* in 2020 if the loan forgiveness doesn't occur until 2021.... better minds than mine are debating it on other forums with no consensus of opinion.

Stay tuned for changes to that if/when Congress decides to play nice together & doing some of the work we pay them to do.

If not resolved by filing time... extensions may be wise.

 

Former Chump... umm.... AllStar.
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Level 13

"Whether they are *not deductible* in 2020 if the loan forgiveness doesn't occur until 2021.... better minds than mine are debating it on other forums with no consensus of opinion."

But the point is, you also are not reporting it as Income. There is no Income to report and no deduction to report. That's the benefit.

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"Level Up" is a gaming function, not a real life function.
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Level 15

Michele - not exactly.

The fact it isn't income is not questioned.  The original intent was that the expenses were STILL deductible; the IRS issued a ruling contradicting that.  The discrepancy needs resolution - and only Congress can do that.

Former Chump... umm.... AllStar.
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Level 11

@abctax55 "The discrepancy needs resolution - and only Congress can do that"

Remember we do have a third branch of government.  

 

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Level 15

@BobKamman 

True... we will just have to wait & see on that as a possible solution.

Former Chump... umm.... AllStar.
If a post answers your question, click on *Accept as solution* for future searches
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Level 15

As of now, expenses not deductible if paid with forgiven PPP loan.

Perhaps not deductible in 2020 even though forgiveness may not happen until 2021.

https://www.taxnotes.com/featured-news/ppp-borrowers-brace-potentially-problematic-irs-guidance/2020...

As Anna said, we need to wait and see.


ex-AllStar
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Level 11
Level 11

I concur with @sjrcpa @abctax55 @qbteachmt 

This could definitely be a cluster once tax season begins if congress/IRS dont hash this out with some sort of guidance. I think extensions may be wise. I hadnt thought that far ahead but I like the idea. 

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Level 15

The way Washington works these days, I'm going to guess that they will pass legislation to make the expenses deductible on 4/16/21.  You can't fix stupid, but evidently you can vote for stupid to send them to Washington.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.