If you want to get your PPP loan forgiven, at least 75% of the funds must be used on payroll expenses and the remainder on rent or lease payments, mortgage interest, and utilities.
But the definition of “utilities” for the purpose of the PPP is actually more robust than what is considered a utility for your tax return.
What is a utility for the PPP?
The following are all considered forgivable utilities expenses for the PPP:
- Water bill
- Telephone (cell phone and landline)
- Internet bill
- Transportation costs
Traditionally, “utilities” normally means electricity, water, gas, and sewage only. But as you can see, the PPP adds the additional categories of telephone, internet, and transportation costs.
What transportation costs are eligible for forgiveness?
The SBA has yet to release guidance on which expenses are included under the category of “transportation.” Current understanding of the guidelines is that the same principles will apply to PPP forgiveness as they do for tax filing. This would mean you have two options for tracking expenses that you could choose from to maximize your forgiveness:
Standard mileage rate entails tracking your miles driven for business purposes and then multiplying it by the standard mileage rate (set at $0.575 per mile for 2020).
Actual expense method entails tracking all costs of operating the vehicle in the eight week period. Examples include costs like gas, oil, and repairs.
Further reading: How to Calculate Mileage Rates
What conditions must be met for a utility cost to be eligible for forgiveness?
All agreements must have been in place prior to February 15th, 2020. Any agreements that began after February 15 would not be eligible for forgiveness.