Business owners received very favorable tax treatment from the federal government for their PPP (Paycheck Protection Program) loans. Those who received the loans and then had them forgiven, which includes many HVAC contractors, are able to avoid taxes on the forgiven loans and deduct the expenses paid for with PPP money. Some states have been less generous, a situation that creates extra tax issues and could cost businesses money.
Most states are following the lead of the federal government and not taxing forgiven PPP loans. In addition, almost all states are allowing businesses to deduct all the expenses paid for with PPP money. There are a few states that are either placing limits on exemptions and deductions. Five states are still including forgiven PPP loans in tax calculations. A couple of states have no applicable taxes. Some of the states forgoing taxes on the loans aren’t allowing the deductions, and other states that allow the deductions are taxing the forgiven loans.