Is the EIDL Advance Taxable?

One of the important things we do at The Tax Reduction Letter is keep very close tabs on IRS guidance.

I’m glad we do, because recently the IRS issued important guidance indicating that business expenses used to create Paycheck Protection Program (PPP) loan-forgiveness are non-deductible.

This means that if you received an Economic Injury Disaster Loan (EIDL), you may wonder if this money is taxable to you or reduces your taxable business expenses.

The IRS hasn’t provided specific guidance, but we’ll give you our considered opinion on how this money will be treated when you read our new article titled Tax Tips: Is the EIDL Advance Taxable?

Three ways our fact-filled article can help you:

1. We’ll explain the EIDL advance policy. The SBA recently decided to limit the EIDL emergency advance to $1,000 per employee, up to a maximum of $10,000. This whole issue gets quite complicated, but we’ll explain all the details when you read the full article.
2. We’ll tell you how the IRS views the handling of your income. The IRS says you have income for federal tax purposes if you have an “undeniable accession to wealth” and over which “you have complete dominion.” Since there’s no obligation to repay your EIDL advance, it’s generally considered to be taxable income. We’ll explain this fully, including administration exceptions, when you read the full article.
3. We’ll explain IRS policy on deductions. The IRS decided that expenses creating PPP loan-forgiveness, are non-taxable for two reasons. We’ll tell you what they are when you read the full article.