Eligible PPP expenses are now deductible

Written on Jan 07, 2021

The Treasury Department and the IRS this week issued guidance allowing deductions for the payments of eligible expenses when such payments would result in the forgiveness of a loan under the Paycheck Protection Program. 


The COVID-related Tax Relief Act of 2020 amended the CARES Act 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. This change applies for taxable years ending after March 27, 2020. 

PPP deductibility was an issue championed by the accounting profession, including OSCPA and the AICPA. The IRS had recently issued guidance that disallowed the deductibility of forgiven PPP loan expenses, creating an unnecessary burden that has been negated by the new law. The new deductibility provision applies to loans under both the original PPP and subsequent PPP2 loans. 

Notably, the act does not extend the paid leave requirements of the Families First Coronavirus Response Act beyond Dec. 31, 2020. As a result, employers will no longer be required to provide emergency paid sick leave and emergency paid family leave after that date. 

The act does extend the FFCRA’s tax credit for covered employers until March 31, 2021 if: 

  • An employee still has remaining FFCRA leave balances available to use; and 
  • The employer voluntarily allows the employee to use up their FFCRA balances. 

The act does not increase the tax credits available to covered private sector employers for paid leave if the employee has already exhausted all leave up to the limits under the FFCRA. Until March 31, covered private sector employers may continue to provide leave that would have been required under the FFCRA and receive a tax credit to cover the cost, so long as the employee still has such paid leave available to use. 

Explore what's involved in the next round of federal stimulus legislation 

Tune in for the OSCPA Town Hall set for Jan. 14 at noon with special guests Erik Asgeirsson, CEO of CPA.com, and Lisa Simpson, V.P., Firm Services with the AICPA. We’ll unpack key details of the latest version of the Paycheck Protection Program and what it means for you, your business, and your customers/clients. 

Tune in as OSCPA President & CEO Scott D. Wiley, CAE, explores this topic with Erik Asgeirsson with CPA.Com and Lisa Simpson of AICPA and learn about the fintech solution available to CPAs to help with the next round of securing PPP2 loans. 

Business funding is a key new advisory category for CPAs 

Position yourself now to assist your organization or clients through the new fintech funding solution from CPA.com, the technology subsidiary of AICPA. 

The CPA Business Funding Portal, made possible through a partnership between CPA.com and Biz2Credit, gives you access to best-in-class business financing options. Available through a subscription model, the portal is available to organizations of all sizes to help you: 

  • Access government-backed loan programs, such as PPP2 
  • Gain critical insights and AICPA PCPS guidance
  • Manage client financing applications across your firm or organization 

Enhance your visibility as the trusted business adviser for your organization or clients through this valuable fintech solution. 

Other PPP2 Resources