The Paycheck Protection Program (PPP) is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which consisted of government-backed loans to help small businesses and other eligible applicants continue covering payroll costs and certain operating expenses during the coronavirus (COVID-19) pandemic. These loans were available to:
- Small businesses with less than 500 employees
- Sole proprietorships
- Independent contractors
- Eligible self-employed individuals
Under certain criteria, and if you use the funds as directed by the SBA, the loan may be completely or partially forgiven. Go here to learn about PPP loan forgiveness.
For small businesses
Any money you receive from the loan forgiveness is not part of your gross income and therefore isn’t taxable. However, the payroll and other expenses that PPP loan forgiveness covers are also not deductible, even though they usually would be. The IRS says this is “to prevent a double tax benefit”.
