The IRS will allow businesses that got their Paycheck Protection Program (PPP) loans forgiven to write off expenses paid for with that money, shifting policy after Congress passed new legislation in December.
Treasury and the IRS issued guidance Wednesday, Jan. 6, that overrides previous rules that recipients of forgiven PPP loans couldn’t claim deductions for the wages, rent, utilities and other expenses covered by the loans.
The guidance (Revenue Ruling 2021-02) reflects changes to law contained in the COVID-related Tax Relief Act of 2020, to “say that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan.”
The change applies for taxable years ending after March 27, 2020. Learn more.