The New Jersey Senate has approved legislation to ensure that PPP loans that are forgiven by the Federal Government are exempt from New Jersey’s gross income tax.
“As we all know, the COVID-19 pandemic has devastated the small business community in New Jersey. I can name dozens of family restaurants, small retail shops, and other establishments that have either closed their doors forever or are struggling everyday to stay open,” said bill sponsor Senator Anthony Bucco (R-25). “During this extremely difficult time, small business owners should not have to worry about additional taxes. My legislation will eliminate the State tax and keep the State from profiting off the backs of businesses that continue to struggle during the pandemic.”
The paycheck protection program (PPP) was established under the CARES Act, a federal law enacted in response to the economic impact of COVID-19. The PPP offers loans to small businesses in order to help them keep employees on their payroll during the pandemic. Some or all of the loan may be forgiven by the Federal Government if certain conditions are met.
Bucco’s legislation, S-3234, ensures that forgiven PPP loans are not unduly taxed—by excluding those forgiven loans from the State’s gross income tax. The bill also allows the deduction of expenses paid for by a PPP loan as well.
“New Jersey is one of the highest taxed states in the nation,” Bucco added. “During this pandemic, when small businesses are literally struggling to survive, the last thing they need is yet another tax.”
Does anyone know if all other stimulus payments are exempt from gross income taxes?
@Yyp Most of them are exempt from both NJ and federal taxes. The only one that is not exempt from taxes are the unemployment payments— but usually the taxes due are taken out automatically if you chose that option. That said, the extended round of unemployment that Trump implemented via executive order will be deducted from any federal tax return and if the amount owed is more than the tax return money then you will be on the hook and you will owe federal taxes.