PPP Loan Expenses: Forgivable or Not?

10 May 2020

Amidst the financial turmoil created by COVID-19, small businesses need economic security more than ever. One of the largest federal initiatives has come in the form of the Paycheck Protection Program (PPP) by the Small Business Administration (SBA).

If you received a PPP loan, you need to open a long-term liability account in the chart of accounts – SBA PPP Loan 2020. Note that the money you received is a loan, not an income.

Although SBA hasn’t released the Interim Final Rule that concentrates on forgiveness, there are some instructions you will have to pay attention to when it comes to PPP loan.


As of now, forgivable expenses include only those incurred and paid within an 8-week period from the first day the money is deposited to the receiver’s bank account.

What about Expenses?

Business owners can sigh in relief knowing that payroll expenses capped at annualized $100,000 per employee are deemed forgivable. Payroll costs include salary, wages, commission, tips, payment for vacation, parental, family, medical, or sick leave; group health care benefits, including insurance premiums; payment of any retirement benefit; payment of State or local tax assessed on the compensation of employees.

However, businesses will have to utilize a minimum of 75% of spent money on the salaries. It is vital to understand that employer’s FICA portion is not deemed forgivable.

Moreover, rent, mortgage interest, and utilities also fall under “forgivable.” However, don’t expect the forgiven amount to be more than 25% of loan spent. Remember, this includes only rental agreements in effect before February 15, 2020. The same rules apply to mortgage interest payments, gas, electricity, water, transportation, internet and phone bills.

Eligible Expenses Not Qualified for Forgiveness

You can use the PPP loan money to pay interest on your pending debt obligation prior to Feb 15, 2020. However, this amount will not be forgivable.

What You Need to Know

Your forgivable expenses under the PPP loan amount are not tax-deductible.


The guidelines pertaining to PPP loans continue to change. Thus, you can expect certain adjustments at the end of the period for your PPP loan. Whether you qualify for SBA’s forgiveness loan or not, it would be wise to maintain a thorough record of all your expenses. You have to keep copies of every bill for any expense paid during this time period, regardless of whether it might be applicable for forgiveness under the current SBA guidelines.

If you have questions, feel free to reach out to us to find out the most suitable approach to attain PPP loan forgiveness.

Contact us to save yourself and your business from the difficult tax situations and have peace of mind!
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