Yes, Paycheck Protection Program (PPP) loans do affect low-income housing. But not for the reason that you may think. If you applied and were approved for the PPP loan but do not have a business, you could be in trouble. The PPP loan program was created to help keep small businesses afloat during the Covid 19 pandemic by covering employees’ and owners’ paychecks when they did not have enough revenue.
If you applied for and were approved for the loan but did not own your own business nor ever report owning a business to your landlord, that is considered fraud. Using a fraudulent federal PPP loan for personal expenses instead of business expenses goes against the guidelines set for the loan.
Likewise, if you did have a small business but failed to report earnings from this business to the housing authority, this could also jeopardize your low-income housing eligibility, as affordable housing is based on income.
Does the PPP Loan Count as Income for Section 8?
No, PPP loans do not count as income for Section 8 as it is a business loan and is intended to cover business purposes. According to the IRS, if you use PPP loans to cover certain expenses, such as payroll or rent, and these expenses are later forgiven (meaning you don’t have to repay them), the income you receive from this loan forgiveness is not considered taxable income (it’s excluded from your gross income).
However, the IRS has determined that because this forgiven income is already tax-free, you cannot also claim a tax deduction for the same expenses that were paid with the loan. In other words, you can’t “double-dip” by both excluding the forgiven loan amount income and claiming a deduction for the expenses that were covered by the forgiven loan.
Do You Have to Report the PPP Loan to Section 8?
Because PPP loans are not considered income, they cannot be used to determine your eligibility for Section 8. This means you do not have to report them to HUD. Be that as it may, PPP loan recipients are public record. If you listed small business revenue on your PPP loan application that you did not disclose to HUD, this could put your affordable housing eligibility at risk.
Conversely, if you fraudulently listed small business revenue and received PPP loans, this could also land you in hot water with the federal government.
