Guidance has finally been released on the deductibility of Paycheck Protection Program (“PPP”) expenditures for New Jersey income tax filers.
PPP loans not taxable
As of February 10, 2021, Governor Murphy confirmed that PPP loans will not be taxable at the state level and recipients will be able to deduct the business expenses that were paid from the loan proceeds. New Jersey will follow the federal government’s treatment without enabling legislation, under existing authority.
Federal law considers forgiven loans to be taxable income, but the Consolidated Appropriations Act, 2021 clarified that PPP loans that are forgiven may be excluded from income and expenditures covered by PPP loans may be deductible for federal tax purposes.
New Jersey business owners will benefit
As New Jersey was one of the hardest-hit states by the COVID-19 pandemic, this news brings some sigh of relief to businesses owners and taxpayers, who will undoubtedly benefit from the income tax savings.
PPP was reopened to eligible businesses in January 2021 for those who were eligible to take a First Draw loan in 2020 but did not; for those who seek an increase in their original First Draw loan; and those seeking a Second Draw loan. If you need assistance in understanding your eligibility for this program or help with your forgiveness application, please reach out to our PPP Help Desk at the following email address: COVID-19@SobelCoLLC.com
