Law & Order

Expenses Paid Are Not Deductible on Forgiven PPP Loans

By SEMA Washington, D.C., Staff

The Internal Revenue Service (IRS) has ruled that a PPP loan borrower may not deduct eligible expenses on its 2020 tax return if the borrower has a reasonable expectation that the PPP loan will be forgiven. The ruling applies to a covered PPP loan for which the taxpayer has filed or intends to file an application for forgiveness by the end of the taxable year. A “reasonable expectation” would exist if the PPP loan had been used to pay expenses outlined in the CARES Act (payroll, rent, interest on the mortgage, covered utility payment, etc.).

The IRS has also ruled that the PPP borrower may claim a deduction on its 2020 tax return if the borrower’s forgiveness application is denied in whole or in part, or if the borrower does not seek forgiveness. If the tax return has already been filed, the borrower may amend it.

For more information, contact Stuart Gosswein at