Rep. Dan Meuser. R-Penn., Provides insight into what the stimulus agreement will include and when it is likely to be voted on.
Congress passed a $ 900 billion round of coronavirus relief, enabling small business owners to re-apply for a loan through the popular Paycheck Protection Program, with some major differences.
One important change to loan recipients is likely to benefit from the fact that their loan dollars can be tax deductible.
Legislators have changed the language to ensure that recipients who have forgiven their loans can claim tax cuts on deductible expenses – even if they are paid for using state aid, which is an important sight in the first round.
It is expected that more guidance can follow on the issue, including whether the tax cuts can also be demanded at state level.
PPP BORROWERS stand firm to obtain tax deductions
Tax deductibility became a controversial topic after the IRS issued guidelines in the spring to prevent business owners who forgave their PPP loans from claiming tax cuts, as the loans themselves were tax-free. This guidance was based on existing legislation, which is usually aimed at preventing people from receiving a ‘double tax benefit’.
U.S. Treasury Secretary Steven Mnuchin backed the IRS ruling, saying it was “basically tax 101” at the time.
“The money coming into the PPP is not taxable,” Mnuchin told FOX Business in May. “So if the money that comes in is not taxable, you can not double it, you can not say that you are going to get deductions for workers for which you did not pay.”
If the PPP grants were taxable, the deductions would be viable, Mnuchin added.
Others, however, said the loan was less valuable to the recipient if the recipients’ ability to claim these deductions was eliminated.
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In addition to the prospect of tax deductible expenses, here are some of the other conditions that are expected to accompany the renewed round of PPP loans.
Loans can be issued up to a maximum amount of $ 2 million. In order to obtain forgiveness, at least 60% of the money must be poured into wage expenses, while the rest can go to rent, mortgage interest and utilities.
Eligible applicants must have less than 300 employees and must be able to show a 25% decrease in income between the last quarter of last year and the same period in 2020.
Loans are expected to be available by the end of March.
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