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Allow KY Small Business to Deduct Expenses Paid with COVID-19 Loans

Allow KY Small Business to Deduct Expenses Paid with COVID-19 Loans

January 11, 2021 Last Edit: June 5, 2025

Allow KY Small Business to Deduct Expenses Paid with COVID-19 Loans

NFIB State Director Tom Underwood said today that small businesses across the commonwealth are calling on lawmakers to pass a measure allowing them to deduct forgiven expenses paid for with federal Paycheck Protection Program (PPP) loans on their Kentucky income taxes.

“You’re allowed to deduct these expenses on your federal income taxes, but Kentucky says you can’t deduct them on your state taxes, and that’s not fair,” Underwood said. The federal COVID-19 recovery act signed into law last month reversed an IRS ruling and clarified that PPP forgiven expenses are deductible.

“The pandemic has taken a tremendous toll on Kentucky’s small businesses, and a lot of them are barely hanging on,” Underwood said. One in four small businesses nationwide surveyed last month by the NFIB Research Center warned they would have to close within six months unless economic conditions improve soon.

“We need the General Assembly to relieve some of the financial pressure bearing down on them by allowing them to deduct costs associated with staying open and keeping people employed during the pandemic,” Underwood said.

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