PPP Loans and Taxes

The Paycheck Protection Program (PPP) has provided financial support for many small businesses in America, including ophthalmology practices. But as tax season approaches, practices are researching the possible impact of these loans on their bottom line.

The PPP loans are a part of the CARES Act and were provided by lenders approved by the Small Business Administration. The purpose was to provide relief for businesses impacted by the public health emergency (PHE) and protect their employees from layoffs or furloughs. The funds assist with overhead expenses, including payroll, rent, utilities, medical supplies and the sudden need for increased personal protective equipment (PPE).

The U.S. Chamber of Commerce recently provided guidance on that tax impact of PPP loans. With the passage into law of the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) of 2021 became law in December 2020, it confirms:

• A forgiven PPP loan is not taxable income.
• Business expenses paid with PPP funds are deductible.
• Business taxes cannot be paid with PPP funds.

Explore the recently updated Guide to Small Business COVID-19 Emergency Loans provided by the U.S. Chamber of Commerce. It addresses the new law as it relates to PPP loans and other tax credits.

Always consult with your practice accountant regarding taxable income and related business expenses and the impact of PPP loans.