Sole Proprietors, PPP Loans and Home Office Expenses

The August 27th Interim Final Rules seem to allow a sole proprietor to include home-office expenses toward loan forgiveness. This is in direct contradiction to the April 14th IFRs which say home-based expenses DON’T count.

Here is what the latest IFR says, regarding home-based businesses:

“(T)he borrower may include only the share of covered expenses that were deductible on the borrower’s 2019 tax filings, or if a new business, the borrower’s expected 2020 tax filings.”

This seems to be saying that the mortgage interest, rent and utilities for a home-based business must be in the same percentage as was used on the Form 8829 for 2019.

What if you didn’t claim the home-office deduction in 2019? You’d be out of luck, no PPP forgiveness.

What if you claimed the safe harbor of $5 per square foot? Again, you’d be out of luck, no PPP forgiveness.

Probably a Moot Point Anyway

With the 24-week forgiveness period that is available now, home-office expenses are likely a moot point for sole proprietors anyway.


George has a sole proprietorship that showed net income of $48,000 in 2019. George’s loan limit is $10,000 ($48,000 / 12 x 2.5). Per the forgiveness formula for 24-week forgiveness for sole proprietors, forgiveness is 2.5-month’s worth of 2019 net income …. in other words, full cancelation of the PPP loan. There’s no need for George to even bother with home-office expenses because he gets full forgiveness anyway.

The above example is why EVERY sole proprietor should be doing 24-week forgiveness rather than 8-week forgiveness.