Internal Revenue Service: No Deductions for PPP Loan Forgiveness

May 1, 2020

On April 30, 2020, the Internal Revenue Service (IRS) released guidance on the deductibility of certain otherwise deductible expenses when a business receives a Paycheck Protection Program (PPP) loan. 

The IRS’ answer? No.

In Notice 2020-32, the IRS clarifies that no deduction can be taken for an expense if the payment of the expense results in forgiveness of a PPP loan and the income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

It’s clear from Notice 2020-32 that the IRS stance is that a business would receive a double benefit by exempting from income the discharge of debt and also taking a deduction for the wage expense.

For a complete look at Notice 2020-32, click here.

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