New SBA Guidelines for PPP, Some Good, Some Bad

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The Paycheck Protection Plan (PPP) has expired now. You can no longer apply for one. But if you did get a PPP, at some point, you’re going to need to apply for loan forgiveness. Otherwise, it is a loan that you need to pay back. 
There have been a number of SBA guideline changes since Congress first gave us the PPP in the CARES Act in late March 2020. 
And, now we have more changes. These will impact owner salary amount, home office deductions and mortgage interest.

Owner Salary Change for PPP Loan Forgiveness 

There is a change for PPP loan forgiveness in an S or C Corporation. In the case of owner/employee salary, you first need to look at what percentage of the company is owned by the owner/employee. It has to do with the way an owner/employee salary in a corporation is calculated for the PPP loan forgiveness. 
If the owner/employee owns less than 5%, the owner/employee compensation rule does not apply. Also, the owner/employee can have covered benefits like health insurance premiums and retirement plan contributions and the company can take the deduction for calculation of PPP forgiveness.
The total amount allowed for a deduction is up to $46,154 over 24 weeks.  

If the ownership percentage is higher than that amount, the amount taken can not exceed the lesser of $20,833 or 2.5 months of your 2019 compensation. If you elect to use the 8-week covered period, the maximum amount is the lesser of $15,385- or 8-weeks of 2019 compensation.  

Home Office Deductions for PPP 

The home office expenses are only forgivable based on the prorated amount you claimed as a deduction on your 2019 tax filings or, if you have a new business, the amount you expect to claim on your 2020 filings.  

Mortgage Interest Payments with PPP Forgiveness 

Let’s say you have a bricks and mortar business. Rather than rent the space your business is in, you decide to buy it. 
But you also know that a good asset protection strategy means that you hold the property separate from the operating business. (You don’t want a judgement from the business to get hold of a real estate asset.)
As an example, let’s say you have an LLC taxed as an S Corp, LLC-S, for the business and a different LLC for the real estate.
The mortgage interest portion for the payments that the LLC makes would count as part of PPP forgiveness for the LLC-S. If the building is only partially used by the LLC-S, then you do have to pro-rate the mortgage interest. Only the part that is used for the business will count.  

The loan forgiveness program is tricky. For that matter, we’re recommending that our clients wait the full 24 weeks before filing for forgiveness. They keep changing the rules. Make sure you know the latest! 
We cover these strategies and more as part of the weekly coaching. The sessions are recorded so that you can go back to listen at your leisure.  

Learn about coaching now.


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