PPP Expenses Tax Deductible For 2020

PPP Expenses Tax Deductible For 2020

Dan DeHoek
DeHoek & Company, PLLC

On Dec. 28th, President Trump signed the $900 billion Covid-19 bill, which had passed both Houses of Congress a few days earlier. Generally, it means another $600 stimulus payment to individuals earning under $75k per year, an extension of $300 weekly unemployment benefits, and more than $300 billion in aid for small businesses.

Key business provisions in the bill include:


    • Tax deductibility for PPP expenses. This will be a big saving at tax time. It is comparable to getting an additional 25-40% (your federal and state tax rate) of the original PPP loan. If you haven’t done so yet, contact your bank and move forward with getting the loan forgiven by SBA.


    • A 2nd round of PPP loans for businesses who have used or will use the full amount of the first PPP loan. Businesses have to show a 25% gross revenue decline in any 2020 quarter compared to the same quarter in 2019. Note that funding is still available for first-time borrowers. Also, the PPP formula has been changed to allow for extra PPP money for hotels and restaurants (Previously, the amount that a restaurant could borrow was based on a formula in which its average monthly payroll costs were multiplied by 2.5, up to a maximum loan of $10 million. The new bill will change the multiplier to 3.5, but only for restaurants and hotels, up to a maximum loan of $2 million).


    • Simplified forgiveness application process for loans of $150,000 or less. Basically, the SBA has 24 days to create a simplified application form of less than one page. Although, SBA is allowed to audit or review the loans for fraud.


    • Temporary allowance of 100% for meals as long as the expense is for food and beverage provided by a restaurant (1/1/20 – 12/31/22).


For businesses that received PPP loan funds, I see the tax deductibility for PPP expenses as a huge win. Now is the time to contact your CPA and discuss tax planning before the end of 2020. Stay healthy and prepare for a great 2021.

Daniel R. DeHoek CPA/ABV CFP®