Questions & Answers

What is the COVID-19 Related Loan Forgiveness and COVID-19 Utah Grants Subtraction?

The COVID-Related Tax Relief Act (COVIDTRA) was signed into law at the end of 2020. COVIDTRA has largely rendered this subtraction not applicable. Almost no one will qualify for this subtraction.

Under the CARES Act (the first COVID related stimulus law) some COVID related grants were taxable income and the payroll protection program tax free loan forgiveness did not allow business deductions for expenses paid with forgiven loan proceeds. Utah passed this subtraction to make any COVID funds that were taxed by the IRS tax free in Utah. COVIDTRA has made the formerly taxable grants tax-free, and it is allowing business deductions for expenses paid with forgiven PPP loan proceeds.

The deduction is allowable if you meet any of the following criteria:

  • You received a federal COVID-19 related grant as an advance and the advance is being included in your federal adjusted gross income (AGI). The amount included in federal taxable income can be subtracted from Utah taxable income
  • You received federally-funded, COVID-19-related grants from the state of Utah, or from a Utah city or county, which were included in federal adjusted gross income (AGI). The amount of the grant that was included in your federal AGI can be subtracted from Utah taxable income.
  • You have taken COVID-19 related federal loan forgiveness and some of your ordinary business expenses were not deductible on your federal return. You may subtract the sum of your nondeductible ordinary business expenses from Utah taxable income
  • You have received any other federally funded loan forgiveness from Utah in response to COVID-19 that is included in your federal adjusted gross income (AGI).

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