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Recipients of small business PPP loans 2.0 may benefit from this key tax change



Congress passed a $900 billion coronavirus relief program, which will allow eligible small business owners to apply for another loan through the popular “Salary Protection Program,” but there are some major differences.

A key change that loan recipients may benefit from is that their loan amount is tax-deductible.

The legislators revised the wording to ensure that recipients who received loan relief can claim tax relief on deductible expenses, even if they were paid through the use of government aid, marking an important turning point in the first round.

It is expected that more guidance will be provided on this issue, including whether tax cuts can also be requested at the state level.

PPP borrowers get tax relief

After the U.S. Internal Revenue Service issued guidance in the spring, since individuals who purchase PPP loans are tax-exempt, tax-exempt business owners can request tax deductions, which has caused a dispute over tax credits. The guide is based on existing laws, which are usually designed to prevent people from getting “double tax benefits.”

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US Treasury Secretary Steven Mnuchin (Steven Mnuchin) supported the US Internal Revenue Service (IRS) ruling, saying that it was “Basic Taxation 101”.

Mnuchin told FOX Business in May: “There is no tax on the funds you make from purchasing PPP.” “Therefore, if the upcoming money is not taxed, you cannot double-pay, nor can you say that you will Get relief for unpaid workers.”

Mnuchin added that if the PPP grant is taxable, the deduction is feasible.

Others, however, stated that eliminating the recipient’s ability to request these deductions would reduce the loan’s value to the recipient.

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In addition to the potential tax deductible expenses, here are some other terms that are expected to appear with the new round of PPP loans.

The maximum loan allocation is US$2 million. In order to be forgiven, at least 60% of the money must be spent on wages, while the rest can be used for rent, mortgage interest, and utility bills.

Eligible applicants must have less than 300 employees and must be able to show a 25% decline in revenue from the last quarter of last year to the same period in 2020.

The loan is expected to be provided before the end of March.

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