Level 2

Is forgiven PPP interest also considered tax exempt income?

Forum|Forum|4 years ago
January 27, 2022
1 reply
15 views

A number of clients have provided PPP forgiveness letters that include forgiven interest (which they never paid). I know the forgiven PPP loan balance is tax exempt income. However, is the forgiven interest also tax exempt? Can't find any guidance on this anywhere.

Assuming it is, appears we'd have to book an entry to debit interest expense and credit tax exempt income to account for the interest "paid" by the forgiveness.

Thoughts?

Lacerte Tax

This topic has been closed for replies.

sjrcpa

Level 15

The forgiven interest is also tax exempt.

Your approach is correct.

The more I know the more I don’t know.

O

OregonAuthor

Level 2

Do you have any sources or guidance you could point to?

I've looked through the more recent Rev-Procs that reiterate that "no amount is included in the gross income of a recipient by reason of the forgiveness of a PPP loan and no deduction is denied", but have found nothing that specifically talks on the interest component.

Thank you!

sjrcpa

Level 15

If it's not in the latest Rev Proc, maybe the IRS FAQs? Even though they are not authoritative.

I really can't remember where I saw this.

The more I know the more I don’t know.

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