IRS gives OK for tax breaks on forgiven PPP loans 

The Internal Revenue Service will allow businesses that received their Paycheck Protection Program loans forgiven to write off expenses paid for with that money, shifting policy after Congress passed new legislation last month.

IRS guidance issued today overrides previous rules that recipients of PPP loans that had been forgiven couldn’t claim deductions for the wages, rent, utilities and other expenses covered by the loans, Bloomberg reports. The change came after a bipartisan move in Congress to clarify that business owners should be eligible for those tax breaks.

The recent stimulus legislation updated the Cares Act passed in March to say “that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan,” the IRS said in a statement.

The change is widely regarded as a victory for small businesses, which can use tax-free money to generate more breaks, something that’s typically prohibited under the tax code. Lawmakers said allowing the deductions was necessary to keep small businesses afloat amid waves of restrictions and weakened consumer spending resulting from the coronavirus pandemic.  Read the full story.