How to Calculate Your Paycheck Protection Program Loan Amount

Editor’s note: On February 22, President Biden announced changes to the Paycheck Protection Program. One change allows the self-employed to apply using gross income so long as they file a Schedule C. Check out our video below for an overview and read our guide on How to Calculate Gross Income for the PPP.



The Paycheck Protection Program (PPP) has proven to be the most popular coronavirus relief measure for small businesses: an up-to $2 million forgivable loan designed to keep employees on payroll.

Read our full summary of the second round of PPP funding.

How PPP loans are calculated

PPP loans are calculated using the average monthly cost of the salaries of you and your employees. If you’re a sole proprietor or self-employed and file a Schedule C, your PPP loan is calculated based on your business’ gross profit (or gross income).

Your salary as an owner is defined by the way your business is taxed. If you are taxed as an LLC, your salary is directly linked to your business’ profit, and is the amount you paid self-employment tax on in 2019 or 2020. If you are taxed as a corporation, your salary is dependent on running payroll for yourself—meaning you must be remitting federal and state payroll taxes. Corporations paying owners through owner draws won’t qualify for the PPP.

The loan calculation itself requires you to use your annual salary, and the annual salary of any W2 employees whose primary residence is the United States.

The PPP sets a cap on salaries of $100,000—if you or any of your employees make more than that, you can only write $100,000 on your application. Above and beyond the $100,000 salary mark, you can also include related payroll expenses, such as health insurance, retirement contributions, paid sick leave, vacation pay, and severance pay.

In 2020, PPP loans were calculated using your 2019 payroll costs and net profit. But for PPP loans after March 3, 2021, you have the option of using your 2019 or 2020 payroll costs and gross profit. For loans approved prior to March 3, 2021, applicants had to use their 2019 or 2020 net income (as reported on line 31 of their Schedule C)

The easiest way to get these numbers

If you have employees (and pay yourself a salary too), you should be able to download a payroll report through your payroll provider. Many payroll providers are even offering “PPP reports” that tell you everything you need to know for your loan application.

If you’re self-employed and have completed your 2019 or 2020 tax return, your Schedule C will show your net profit. The Schedule C you provide does not need to be filed, but it should still be reviewed by a tax professional.

Having correct financials for your PPP application is critical

Ensuring your profit is reported properly will maximize the loan amount you are eligible for. Additionally, if the numbers you provide your lender and the SBA are incorrect, you will run in to problems getting your loan forgiven. If you provide financial information you’re not confident in, you open your business up to penalties that include an audit, or possible fines and jail time.

To give you the confidence your application numbers are correct, you need to have strong bookkeeping in place. Accurate and up-to-date books will allow you to properly fill out your Schedule C for 2019 or 2020. Need historical bookkeeping done for 2019 or 2020? Bench can help.

Calculating your PPP loan by entity type

If you are a: Your salary will be: Other payroll costs you can include:
1099 contractor Your 2019 or 2020 gross profit (max $100,000) as reported on your Schedule C (line 7). None.
Sole proprietor Without payroll: Your 2019 or 2020 gross profit (max $100,000) as reported on your Schedule C (line 7).

With payroll: Your 2019 or 2020 gross profit as reported on your Schedule C (line 7) minus payroll costs reported on lines 14, 19, and 26 (max $100,000)
U.S. annual employee salaries, including wages, commissions, tips, and state and local payroll taxes. Each employee is capped at $100,000 annually.
Partnership Your 2019 or 2020 self-employment earnings as reported on your Schedule K-1 (line 14), then multiplied by 0.9235. You may include K-1 earnings as salary for each partner, up to $100,000. U.S. annual employee salaries, including wages, commissions, tips, and state and local payroll taxes. Each employee is capped at $100,000 annually.
S corp Your salary as reported through a payroll service (max $100,000). Your salary may only be considered if it was paid through payroll while remitting payroll tax. U.S. annual employee salaries, including wages, commissions, tips, and state and local payroll taxes. Each employee is capped at $100,000 annually.
C corp Your salary as reported through a payroll service (max $100,000). As a C corp, your salary may only be considered if it was paid through payroll while remitting payroll tax. U.S. annual employee salaries, including wages, commissions, tips, and state and local payroll taxes. Each employee is capped at $100,000 annually.

Calculating your PPP loan amount as an independent contractor

As an independent contractor, your 2019 or 2020 gross income is recorded on Line 7 of your Schedule C. When applying, both your Schedule C and 1099-MISC forms for the year will need to be provided.

You’re eligible for the PPP even if you’re an Uber driver or pick up tasks on TaskRabbit.

Here’s a detailed example

Let’s say you worked as a freelance photographer in 2020. You received 1099-MISC forms from 15 events you worked and have your bookkeeping up to date meaning you can fill out your Schedule C. Here’s what you do:

Step One: Bench helps you complete your Schedule C using your 1099-MISC forms and your income statement. Let’s say your gross income on line 7 of your Schedule C is $16,000.

Step Two: Divide $16,000 by 12 months. This gives us $1,333.33. Enter this into the “Average Monthly Payroll” box on your application.

Step Three: Multiply your average monthly payroll amount by 2.5, which gives you $3,333.33. Enter this into the “Loan Request” box.

Calculating your PPP loan amount as a sole proprietor

Your 2019 or 2020 gross profit is listed either on an annual income statement, or on line 7 of your Schedule C if you have a completed tax return.

If you do not have W2 employees, you use just your gross profit to calculate your average monthly payroll costs. If you do have W2 employees you are remitting payroll taxes for, you may also include the annual salaries of any employees whose primary residence is the United States. Keep in mind that your employees, as well as yourself, are all subject to the $100,000 salary cap. If an employee’s salary or your gross profit is over $100,000, you may only calculate using $100,000.

Remember that single-member LLCs are going to be considered sole proprietors here, similar to when you file your taxes. It’s also worth noting if you share a sole proprietorship with a spouse, you cannot include your spouse in this application unless they are a W2 employee. Without W2 employees, you apply on behalf of the legal owner of the sole proprietorship only.

Further reading: How to Calculate Gross Income for the PPP

Here’s a detailed example

You are a sole proprietor that started up in October of 2019, but really only started earning revenue in late 2019 and early 2020. You don’t have any employees, just a few 1099 contractors. You’ve been giving yourself an informal payroll of $1500 a month through member draws. Here’s what you’d do:

Step One: Because you weren’t consistently earning revenue until 2020, you will use your 2020 gross income. With the help of Bench, you complete your 2020 Schedule C using the income statement your Bench bookkeeper provides you. Once completed, the net profit reported on line 7 of your Schedule C is $60,000. You do not include any amounts you took as member draws as salary.

Step Two: You don’t have any employees, so you cannot add additional costs to this amount. Your 1099 contractors cannot be included because they are eligible to apply for a PPP loan on their own.

Step Three: Divide your $60,000 net profit by 12. This gives you $5,000. You report $5,000 in the “Average Monthly Payroll” box on your PPP application.

Step Four: Multiply your average monthly payroll amount by 2.5, giving you $12,500. Report this in the “Loan Request” box.

Some important points for sole proprietors

  • While your rent and utility payments can be covered by this loan and help qualify you for loan forgiveness, they are not a part of the initial calculation.

  • If your gross profit for 2019 or 2020 is above $100,000, the maximum amount you can include for your calculation is $100,000. This would give you an average monthly payroll of $8,333.33, assuming you have no W2 employees.

  • Member draws do not factor into this calculation at all.

  • If your net profit for 2019 and 2020 was zero, meaning you were pre-revenue, you are only eligible for a PPP loan if you are currently running payroll. You may be better suited to applying for the EIDL program instead, or registering for Unemployment Benefits through your state.

  • Self-employed farmers should use Schedule F instead of Schedule C. Use the net profit as reported on line 34 of your Schedule F.

Calculating your PPP loan amount as a partnership

If you run an LLC with one or more other people, and have a formal operating agreement where you’ve outlined ownership percentages, you apply for the PPP as a partnership. Finding your 2019 or 2020 salary as an owner of this business will be very closely related to the net profit of the business. Do not try to make this calculation using your member draws.

Your 2019 or 2020 salary is most easily determined through that year’s tax return, which is your Form 1065.

For each partner, use line 14—Self-Employment Income—on their Schedule K-1 as their individual salary. Remember to cap at $100,000 for each member if necessary. You will then multiply this amount by 0.9235. This is done to remove the partnership entity’s share of self-employment tax.

If you also have W2 employees, include the cost of their salaries, state and local payroll taxes, employer contributions to health insurance benefits, sick pay, vacation pay, and severance. Keep in mind that all salaries are subject to the cap of $100,000. You cannot include any 1099 contractors, as well as any remote workers whose primary residence is outside of the United States. You also need to provide a number of employees, and this should be reflective of your monthly average as well.

Here’s a detailed example

You and a partner run a business together, and this business has existed for a few years now. You have W2 employees. Neither you nor your partner are paid through payroll, and instead take draws from the company. Here’s what you’d do:

Step One: You’ll need your 2019 or 2020 Form 1065 on hand. Take a look at line 14 (Self-Employment Income) on both partner’s Schedule K-1s. Let’s say that Line 14 on your Schedule K-1 is $130,000, and your partner’s is $115,000. Because of the $100,000 cap, you can only include $100,000 for each of you. That gives you $200,000 so far. Your draws will not factor in here, just your self-employment income as reported on your tax return.

Step Two: Pull an annual 2019 or 2020 report from your payroll provider. None of your employees have a salary over $100,000, so they don’t need to be capped. You can also include your state payroll taxes, health insurance expenses, retirement contributions, sick and vacation pay, as well as severance pay. Let’s say this all adds up to $120,000. Add this to $200,000 and you’ve got $320,000.

Step Three: Divide $320,000 by 12. This gives you $26,666.67. Enter this into the “Average Monthly Payroll” box in your PPP application.

Step Four: Multiply $26,666.67 by 2.5 to get $66,666.67. Enter this into the “Loan Request” box.

Step Five: Let’s say your business is busiest for three months in the summer, when you have six employees on staff. The rest of the year you only have three. You can choose to use an average number here which spans all twelve months, which in this case will round to four. Enter this in the “Number of Employees” box.

Some important points for partnerships

  • While your rent and utility payments can be covered by this loan and help qualify you for loan forgiveness, they are not a part of the initial calculation.

  • If your self-employment income for 2019 or 2020 is above $100,000, the maximum amount you can include for yourself is $100,000. This would give you an average monthly payroll of $8,333.33, assuming you have no W2 employees.

  • Member draws do not factor into this calculation at all.

  • If your net profit for 2019 and 2020 was negative, meaning you took a loss, you are only eligible for a PPP loan if you are currently running payroll. You may be better suited to applying for the EIDL program instead, or registering for Unemployment Benefits through your state.

  • Self-employed farmers should use Schedule F instead of Schedule C. Use the net profit as reported on line 34 of your Schedule F.

Calculating your PPP loan amount as an S corp

As an S corp, it is important to note that your shareholder distributions are not considered salary. If you own an S corporation and have not been paying yourself a salary through payroll, meaning you have not been remitting payroll taxes on your wages, you are not eligible to have a salary covered through the PPP.

Why? It comes down to how you are taxed. Eligible payroll costs for the PPP are wages where the employer is remitting payroll taxes. As an S corp, your only way to remit payroll taxes is through payroll itself; you don’t pay any payroll taxes or self-employment taxes on your distributions.

If you have been using a payroll service to pay out your salary, you can include yourself as an employee in your calculations. Remember that no single employee is allowed to have a salary higher than $100,000 for the purposes of this calculation. You must cap any employees over this amount at $100,000 exactly, including yourself. From there, you can include your related payroll expenses, such as group health insurance premiums, retirement contributions, state and local payroll taxes, vacation pay, paid sick leave, and severance.

Here’s a detailed example

You are the sole owner of an S corp and you have been operational throughout 2020. You only had one employee at the start of 2020—yourself—but you grew to add on an additional three employees in the year. Here’s what you’ll do:

Step One: Pull an annual 2020 report from your payroll provider. Since none of your employees have a salary over $100,000, they don’t need to have their salaries capped. You can also include your state payroll taxes, health insurance expenses, retirement contributions, sick and vacation pay, as well as severance pay. Let’s say your total 2019 payroll costs, including your salary, comes to $150,000.

Step Two: Divide $150,000 by 12. This gives you $12,500, which you input into the “Average Monthly Payroll” box on your PPP application.

Step Three: Multiply $12,500 by 2.5 to find your “Loan Request” amount. In this case, it’s $31,250.

Step Four: To find your number of employees, you use the average number of employees you held during 2019 or 2020. Use the same year you used to calculate your average monthly payroll expense. The easiest way to find an average is to add the total number of employees you had during each month of the year together, and divide by 12. Let’s say in this case that works out to 2.75—you should round to a whole number, three, and include this on your PPP application.

Some important points for S corps

  • While your rent and utility payments can be covered by this loan and help qualify you for loan forgiveness, they are not a part of the initial calculation.

  • Shareholder distributions should not be included in this calculation at all.

  • If you own an S corp and did not pay yourself a salary with payroll tax remitted, you are not considered to have a salary. If you don’t have W2 employees either, you are not eligible to apply for the PPP. You may be better suited to applying for the EIDL program.

Calculating your loan amount as a C corp

A C corp owner is only considered to have a salary if you have payroll tax remitted on your wages. Dividends, loans to shareholders, or other owner draws are not applicable as salary. Why? Because the PPP is relying heavily on payroll taxes to define payroll costs.

As a C corp, there is separation between the owner and the business. The business is taxed on its profit as an entity, and the owners are then taxed based on their dividends, which reflect their share of those profits. Neither of these taxes are payroll taxes. If you’re a C corp owner, you are required by the IRS to pay yourself a reasonable salary through payroll.

If you have been using a payroll service to pay out your salary, you can include yourself as an employee in your calculations. No single employee is allowed to have a salary higher than $100,000 for the purposes of this calculation, so you must cap any employees over this amount at $100,000, including yourself. From there, you can include your related payroll expenses, such as group health insurance premiums, retirement contributions, vacation pay, paid sick leave, and severance.

Here’s a detailed example

You own a C corp, and you are the only employee. Your business started in September 2019.

Step One: Let’s start by looking at the year you should use. Because your business was in operation for the entirety of 2020, it’s best to use your 2020 payroll numbers.

Step Two: As the only employee, you just have your salary to include. Let’s say your salary in 2020 was $120,000. You’ll need to cap this salary to $100,000 only. Divide $100,000 by 12, giving you an “Average Monthly Payroll” of $8.333.33 to input into your PPP application.

Step Three: Multiply $8.333.33 by 2.5 to find your “Loan Request” amount, totaling $20,833.33.

Some important points for C corps

  • While your rent and utility payments can be covered by this loan and help qualify you for loan forgiveness, they are not a part of the initial calculation.

  • Dividends, loans to shareholder, or other owner draws should not be included in this calculation at all.

  • If you own a C corp and did not pay yourself a salary with payroll tax remitted, you are not considered to have a salary. If you don’t have W2 employees either, you are not eligible to apply for the PPP. You should consider applying for the EIDL program.

Seasonal employers

Seasonal employers who only operate for a portion of the year can use any 12-week period between February 15, 2019 and February 15, 2020 for their loan calculation. To be considered a seasonal business, you must satisfy one of the following criteria:

  • You do not operate for more than seven months in any calendar year

  • During the previous calendar year, your gross receipts for six of the 12 months were no more than 33.33% of your gross receipts from the remaining six months (e.g. if you earn $100,000 from January through June, you earn no more than $33,330.00 from July through December)

  • You must have employees on payroll

Divide your total payroll costs by three to obtain the average monthly payroll cost you can report.

A note on loan forgiveness

In order to get your PPP loan forgiven, you need to:

  1. Spend at least 60% of the funds on payroll

  2. Spend the remaining 40% on eligible expenses

  3. Prove your expenses that you spent the loan amount on.

The easiest way to prove your expenses is to have bookkeeping done during the period you’re spending the loan funds.

How Bench can help

With Bench, you get a team on your side who can help you make decisions to support the best interests of your business. We’ve helped thousands of small business owners access PPP loans and use our accurate reports to make the forgiveness process easy. With Bench on your team, you’ll have properly completed books to help you:

  1. Figure out your correct loan amount
  2. Track your loan spending to prove you used it on eligible expenses
  3. Use bookkeeping records for your loan forgiveness application
  4. Account for the PPP correctly when filing your taxes and that the right deductions are being taken

Plus, if you ever have questions, your dedicated team of experts are just a quick message away in the Bench app.

If you don’t have a reliable bookkeeping solution in place, check out Bench. We’ll do your bookkeeping for you.

More Paycheck Protection Program resources

What’s Bench?

We’re an online bookkeeping service powered by real humans. With Bench, you get a dedicated bookkeeper and powerful reporting software for a crystal clear view of your financial health. All of our services are eligible expenses for PPP forgiveness, and we’ll even provide support in applying for the PPP (or getting that loan forgiven). Whatever happens next, we’re right there with you. Get started on a free trial today.


This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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