One of NRCA’s largest advocacy wins of 2020 was helping shepherd the passage of legislation that ensured expenses paid with forgiven Paycheck Protection Program loan funds were fully tax-deductible.
Under the CARES Act passed in March 2020, PPP loans were excluded from taxable income; however, at the time, the IRS effectively reversed this language, and small businesses that received loan forgiveness could have faced an unexpected tax bill this year. NRCA was pleased to see the December 2020 COVID-19 relief bill restored the tax deductibility, and shortly after, the IRS issued guidance reiterating expenses paid with PPP loan proceeds could be deducted.
Although relief has been provided at the federal level, PPP loans still are eligible for taxation in some states. Currently, Arkansas, California, Florida, Maine, New Jersey and Ohio are considering legislation to address this issue. View the map to see where your state stands based on data collected by the National Federation of Independent Businesses or view detailed information about your state.
The Tax Foundation offers additional information about PPP loans and taxation.
