22 Dec Deductible PPP Expenses & Other Bill Highlights
By late evening yesterday, the relief bill passed both the House and Senate in Congress. The bill is expected to be signed into law by President Trump.
PPP Expense Deductibility
Prior to this bill, Paycheck Protection Program (PPP) loans were nontaxable when forgiven and expenses paid with PPP loans were nondeductible. The bill continues to treat PPP loans as nontaxable when forgiven and now makes expenses paid with PPP loans deductible.
- PPP second draw loans available for borrowers with fewer than 300 employees that can show a 25% decrease in gross receipts during a 2020 quarter as compared to 2019. Equal to 2.5 times the average monthly payroll for most borrowers (3.5 times for restaurants) up to $2,000,000.
- $600 stimulus checks for individuals, and $1,200 for a married couple filing a joint return. Additional $600 for dependent children under the age of 17. Checks phaseout for individuals with adjusted gross income exceeding $75,000 and for married joint filers exceeding $150,000. Checks/direct deposits expected to be issued starting in early January.
- Expansion of Employee Retention Credit (ERC). The ERC is a credit for certain employers experiencing suspended operations and/or decreases in gross receipts. Depending on the size of the employer, the credit is based on wages paid to employees still working, not working, or both. The ERC is now potentially available for PPP borrowers, formerly not allowed. Eligibility requirements are relaxed for 2021 and the credit amount is increased.
- Extension of the sick leave and family leave credits to March 31, 2021.
- Business meals 100% deductible for 2021 and 2022. Formerly, business meals only 50% deductible.
- Additional $300 per week for those on unemployment through March 14th, 2021, and an extension of the Pandemic Unemployment Assistance (PUA) and Emergency Unemployment Compensation (PEUC) programs which allow for expanded eligibility and time for unemployment benefits.
The relief bill includes various other extensions and modifications of tax provisions and lending programs.