Is the EIDL Advance (grant) considered taxable income?

[AmyD]

For the Economic Injury Disaster Loan Advance, do I have to put it on my taxes anywhere? I only received the advance and declined the loan portion of things.

Seems like according to this website, they are not taxing the Advance amount (the grant money that doesn't have to be paid back.) "If you received the EIDL loan, taxes on these funds work like any other business loan taxation. In other words, funds from the EIDL are not reported as taxable business income on your tax return. "

[MinhT1 · Accepted solution]

The EIDL loan is not considered as income and is not taxable. You do not need to enter it on your tax return.

[glucido]

Although it is not considered taxable income you do need to enter it on your tax return otherwise your tax return balance sheet will be out of synch with your actual balance sheet. It appears that Turbotax has not enabled the appropriate reporting and their support staff is clueless.

[ThomasM125]

On an S-corporation form 1120-S, you can enter it on the Other Tax-Exempt Income Smart Worksheet you will find under line 16(a) on page 4 of form 1120-S . There is a similar worksheet on the partnership return program below line 17 on page 4 of form 1065.

[AmyD]

Can you do that if you are sole proprietorship?

@ThomasM125 

[JamesG1]

The Consolidated Appropriations Act of 2021 provides that taxable income does not include EIDL grants or certain loan repayment assistance.  See here.

[wolfeshunt]

How about on an LLC - Form 1065 return?  Where do you report the grant money so that the tax return and the balance sheet are in balance?

[MaryK4]

It is not taxable income. EIDL advance is specifically excluded from tax. https://www.jpspa.com/consolidated-appropriations-act-effect-ppp-eidl/ The advance is reported in the same area as tax-exempt interest. So, it will need to be reported in M-1 under Permanent Income Items, so that it flows to Form 1065, Page 4, line 18b.  for the Balance Sheet.

@wolfeshunt

[Edited 02/15/2021 | 1:45 PM PST]

[UCguy]

I am using Form 1120 for the tax return. Where do I find the Other Tax-Exempt Income Smart Worksheet for entering the EIDL Grant received? Or I need not to enter the Grant on the tax return?

For the California return Form 100, TurboTax asks if EIDL Grant was received and it is put in Other income on Sch F line 10.  As it is not taxable, should I enter it on the deduction worksheet line 6"other (itemize)" for Line 16 of Form 100 to record the grant received?

Please comment and advise.

[Dannyz]

I do not have an Other Tax-Exempt Income Smart Worksheet for form 1120S and line 16(a) on page 4 is for tax exempt interest.  It seems it should be entered on line 16(b) which can be entered on Schedule M-1 Items Worksheet. My question concerns California form 100S since it seems the EIDL grant is taxable in California.  Unless I override line 5b on Schedule M-1 -- Reconciliation of Income (Loss) per Books Income (Loss) per Return, which is populated from Federal Form 1120S Schedule M-1 I am out of balance by the amount of the EIDL grant.  Am I correct in overriding that amount?

[ReneeM7122]

The EIDL (Economic Injury Disaster Loan) advance grants are non-taxable income, but they are taxable to California.  You are correct to override  line 5b on Schedule M-1, in order to get in balance with the [California taxable] grant.

SBA Economic Injury Disaster Loans

@Dannyz

[trungson]

Anyone has instructions for C-Corp 1120 (not 1120S)? Thanks

[trungson]

I'd like to know about instructions for 1120 as well. Thanks

[JamesG1]

This article states:

The Consolidated Appropriations Act also provides that taxable income does not include EIDL grants or certain loan repayment assistance. This includes instances in which the SBA made six months of “payments” of principal and interest on existing SBA loans on behalf of borrowers, a provision enacted as part of the CARES Act.

Report the income on line 16(a) as Other Tax-Exempt Income if you are filing a form 1120-S.  The entry may require a reconciliation issue if you report your balance sheet on your tax return. This will be handled by the entries in Schedule M-1 and M-2 in TurboTax and on your corporate income tax return.

See also Instructions for IRS Form 1120S page 35.

[trungson]

Thanks James for the answer but that instruction is for 1120S, which is not the same for 1120. There is no Other Tax-Exempt Income in 1120. There is Tax-Exempt Interest but I don't think it's the same thing.