How Do PPP Loans Affect Your Taxes?
The year is almost over, and it’s past time to organize your taxes for 2020. Considering all the twists and turns this year held, your upcoming taxes will probably look different than ever before.
If you took out a PPP loan that was ultimately forgiven, you’re probably beginning to wonder how that’s going to impact your tax filing. Well, on the plus side, the CARES Act clarified that a forgiven PPP loan won’t be taxed as income.
But – there’s always a “but,” right? – the IRS later issued notice that basically says expenses paid for using the forgiven loan cannot be included as a tax deduction since the forgiven loan isn’t included in taxable income.
Sounds reasonable and logical, but it’s something you need to take into consideration as we inch closer to April 15th, 2021 because it could make a HUGE impact on how much you pay in taxes!
Normally, you can deduct payroll, rent and utilities from your taxable income, lowering your income and reducing the taxes owed; however, any of those amounts that were covered by the forgiven PPP loan are not deductible this year.
Don’t worry! There are other ways to reduce your tax bill, and we want to help you make sure you’re paying as little in taxes as possible, legally and ethically. Download 5 Tax Mistakes That Cost You Thousands to learn at least one thing you can do today to reduce your tax bill for 2021 and beyond.