CARES Act Covid-19 EIDL

Forum|Forum|1 year ago
June 17, 2025
5 replies
141 views

All,

The LLC I founded received an EIDL due to the Covid-19 disaster in July of 2020 under the provisions of the CARES Act. Now, 4.5 years later and while this loan which was to provide 6 months of operating capital, looks like it will get defaulted as the LLC has received no revenue since Sept. 2023 and the loan payments have been kept current with the members personal funds.

The Question: Are these loan proceeds considered to be income/unearned income/unrealized capital gains and will be taxable as income, even though the loan proceeds were used for expense purposes? There was some revenue between 2021 and 2023 but the expenses ate up the funds and the revenue was used for member/employee compensation.

Thanks

Not A Product Question

Best answer by JotikaT2

The original terms of the EIDL states that loan proceeds are not considered taxable income. Any loan proceeds used to pay off expenses can still be deducted on your tax return. Please see this link for more details on this loan and the terms as well as this link which breaks down how the loans work as far as taxes.

You have some options available if you are having issues making payments on your loan. Please see manage your EIDL for more details.

JotikaT2

Answer

Alumni - Expert

You have some options available if you are having issues making payments on your loan. Please see manage your EIDL for more details.

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mudtech61Author

Level 2

JotikaT2,

Thanks for responding. OK, if I am understanding you, if the LLC received a EIDL understanding the CARES Act provisions during the Covid-19 emergency and these funds were used to pay allowed expenses (as determined by a CPA firm specializing in EIDL issues) there are NO tax issues? No tax on this money if there is a default as unearned income as the loan was defaulted and the loan proceeds were not repaid to the SBA? Thanks.

Mudtech61