Hoping you could deduct 2020 business expenses paid for with U.S. government loan money?
Not so fast. The Internal Revenue Service issued a ruling last week for business borrowers who got pandemic-era loans this year under the emergency Paycheck Protection Program (PPP).
The upshot of the IRS’s latest ruling? You can’t deduct business expenses come tax time in April — not if you paid with borrowed money.
Philadelphia-area businesses and organizations received roughly $7.2 billion via 77,180 loans, of which 16% were for more than $150,000. Many of the largest borrowers were law firms, which borrowed $228 million.
Those that borrowed $50,000 or less will see loans forgiven automatically; still, any money spent on business expenses isn’t deductible in 2020 taxes.
PPP loans were designed to be forgiven, provided at least 75% of the money was used for payroll costs, rent, utilities, and other eligible expenses.
What if your loan isn’t forgiven? Only then can you and your business take advantage come tax time. In cases where your PPP loan is not forgiven, you can outsource your accounting to deduct those expenses.
