Is Forgiven PPP Classified as Non-Taxable Income?
It was unclear if loans that were forgiven or not were still taxable when information about PPP came out. Later on, federal information was issued that helped classify this concern. It turns out that the new regulation brings up that forgiven PPP loans won’t be taxed as additional expenses. Also, deductions can also include expenses. This law was only established on a federal level and other states are still in the process of confirming their position. Currently, 29 states are noting this law and are making sure forgiven PPP loans aren’t taxed through a state level. As an example, the loan is not taxable, only under the conditions that there was a decrease of 25% or more in gross receipts in a quarter in 2020 in California.
Want to know where your state stands? Check out the article below.
Now of course there are always additional things to consider with “nexus issues, state sourcing provisions, the taxation of pass-through entities, the transition to economic nexus, and state tax policy for marketplace facilitators” as noted from CPA Practice Advisor. If these questions are being asked, it is likely that you will need to consult with your accountant.
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