Tax Update for PPP Loan Forgiveness

On April 30, 2020, the IRS issued Notice 2020-32, that states “no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan.” The IRS has determined that taxpayers who have their PPP loans forgiven may not deduct any business or interest expenses related to the income associated with the loan, effectively eliminating the “tax free” nature of the loan forgiveness included in the CARES Act.

As we have seen in the last number of weeks, rules and interpretations are changing rapidly, stay tuned for future developments and please contact your tax professional directly on 973-298-8500 if you have additional questions.