The Treasury also notes that self-employed individuals claiming a rent expense need to have been eligible to claim a deduction for such expense on their 2019 Form 1040 Schedule C.
What qualifies as rent
In our interpretation of the official Treasury guidance, we consider rent expenses to be any amount that is paid in a periodic manner, in order to use property for business purposes. These expenses must be a result of a signed agreement from before February 15, 2020.
This is a fairly broad interpretation that will allow expenses other than a building lease payment to qualify as eligible rent expenses.
The Treasury’s official guidance has two examples of acceptable rent expense:
- Rent for a warehouse where you store business equipment
- Rent for a vehicle you use to perform your business
Based on this interpretation, we believe the following examples would also qualify:
- Rent for an office space or building
- Rent for business equipment
- Rent for a storefront or kiosk
- Rent for a chair or booth in a salon or barbershop
- Rent for a personal space you use solely for business purposes, if you were eligible to claim it as a home office expense on your 2019 taxes
Things that don’t qualify as a rent expense
The following items wouldn’t be eligible for PPP rent expense:
- Rent for a personal space you normally live in but you’ve been using now for business purposes. For example, if you’re a sole prop who suddenly started working out of your apartment because of COVID-19, this would not be considered an eligible PPP rent expense (because you would not be able to claim it on your 2019 Schedule C)
- Van rental for a week to move supplies (because it was a one-time rental)
Remember, the PPP is intended to protect paychecks. At least 60% of your forgiven amount must be attributed to payroll or owner compensation replacement. If you spend your entire loan on rent, you won’t qualify for any forgiveness.
More PPP resources
- Paycheck Protection Program (PPP) Loans Resource Hub for Small Business
- Safe Harbor Rules for PPP Loan Forgiveness
- How to Spend Your PPP Funds (FAQ)
- Common PPP Misconceptions
- EIDL and Collateral: Your Questions Answered
- How to Fill Out Your PPP Loan Forgiveness Form
- PPP Loan Forgiveness: The Complete Guide
- PPP Forgiveness: 8 Weeks vs. 24 Weeks