Good news for businesses comes from the COVID-related Tax Relief Act of 2020. PPP Expenses are now deductible! This was signed into law on December 27, 2020. The IRS hadn’t posted anything until January 6, 2021, which is why have waited to share this news. The new law states that “no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of exclusion from gross income of the forgiveness of an eligible recipient’s covered loan.”
Up to this point businesses were not going to have to include the loan forgiveness in income. However, businesses also were not allowed to take the deductions that the loan paid for. This has changed and just in time for tax season. The deductions that the loan paid for are now deductible for tax purposes. The loan forgiveness is still not considered income.
Essentially making the PPP free money providing Small Business Administration guidelines were followed.
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