Under Ohio’s Commercial Activity Tax (CAT), the loans are excluded from taxable gross revenue but, consistent with gross receipts taxation, the CAT does not allow a deduction for business expenses. In Ohio, Nevada, and Washington, there is no deduction for business expenses, consistent with gross receipts taxation. Under Ohio’s individual income tax, forgiven PPP loans are excluded from taxable income and the expense deduction is allowed. Nevada treats forgiven PPP loans as a taxable gross revenue Ohio, Texas, and Washington do not. Ohio imposes an individual income tax and a GRT. *Nevada, Texas, and Washington do not levy an individual income tax or a corporate income tax but do levy a GRT. State Tax Treatment of PPP Loans Forgiven in 2020 (Last Updated August 23, 2021) State The map and table below show states’ tax treatment of forgiven PPP loans. Many states, however, remain on track to tax them by either treating forgiven loans as taxable income, denying the deduction for expenses paid for using forgiven loans, or both. However, Congress chose to exempt forgiven PPP loans from federal income taxation. Ordinarily, a forgiven loan qualifies as income.
Many borrowers will have these loans forgiven eligibility for forgiveness requires using the loan for qualifying purposes (like payroll costs, mortgage interest payments, rent, and utilities) within a specified amount of time. Small Business Administration’s Paycheck Protection Program (PPP) is providing an important lifeline to help keep millions of small businesses open and their workers employed during the COVID-19 pandemic. While most states are on track to apply consistent tax treatment to loans forgiven in 20, that is not the case in all states. Note: The map and table below show state tax treatment of PPP loans forgiven in 2020, not necessarily those forgiven in 2021.
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