The Payroll Protection Program (PPP) loan fund is officially tapped out (for now), but if you were able to secure a loan through this program for your freelance business, it is important to know how forgiveness of this loan will work on your 2020 tax return.
First, let’s look at what are considered qualified uses for funds from a PPP loan. While you can use your loan for any business expense, if you use it for anything other than payroll costs, mortgage interest, rent or utilities during the eight weeks after getting the loan, you’ll have to pay the loan back.
If you are counting on having your loan forgiven, make sure you use the money for:
· Net earnings from self-employment
· Mortgage or rent payments
· Utility payments
· Interest on debt taken out before Feb. 15, 2020
It is not recommended to use your loan funds for both approved and nonapproved purposes, since only the money spent on approved uses will be forgiven. To qualify for loan forgiveness, at least 75% of the loan amount must go toward payroll costs