PPP Loan Forgiveness Example Calculations

The information in this page is based on laws, rules, regulations, and related guidance with respect to the Paycheck Protection Program (PPP), including guidance issued by the U.S. Small Business Administration (SBA) on August 11, 2020. We will periodically update this information, so please check back often and consider bookmarking this page. In the event of any discrepancies between the information on this site and the SBA’s site, please follow official SBA guidance.

Important Links

PPP LOAN FORGIVENESS DOCUMENTS REQUEST FORM

COMPLETE LOAN FORGIVENESS GUIDE

HOW TO FILL OUT YOUR PPP LOAN FORGIVENESS APPLICATION

Examples

To give you a better idea of the process, here are some examples of the PPP forgiveness calculation in action. Take a look at examples of partially and fully forgivable loans.

Partially forgivable loan

Let’s say you received a PPP loan worth $200,000. Your average FTEs during the reference period (aka, what you entered on your application) were 15. Your average FTEs during the covered period were 12. You are not eligible for the FTE safe harbor. You didn’t cut any of your remaining employees’ wages.

Here’s a rough breakdown of what you used the PPP loan for:

  • $150,000 compensation
  • $20,000 health insurance contributions
  • $10,000 state and local taxes assessed on wages
  • $10,000 rent
  • $2,000 utilities

Quick calculation

First, add together your payroll and non-payroll costs:

  • $180,000 (gross compensation + health insurance contributions + state and local taxes assessed) + $0.00 (mortgage interest) + $10,000 (rent) + $2,000 (utilities) = $192,000

Next, subtract your wage reduction amounts. Because you didn’t reduce wages, your wage reduction amount is $0.00:

  • $192,000 – $0.00 = $192,000 

Multiply that number ($192,000) by your FTE reduction quotient. But before you can do that, you need to find your FTE reduction quotient.

So, let’s find the FTE reduction quotient. Divide your FTEs during the covered period (12) by your FTEs during the reference period (15):

  • 12 (FTEs during covered period) / 15 (FTEs during reference period) = 0.8

Now you can multiply the total of your payroll and non-payroll costs minus wage reduction amounts by the FTE reduction quotient:

  • $192,000 X 0.8 = $153,600

Finally, you must select the smallest amount between the following three options:

  1.  [(Payroll + Non-payroll Costs) – Wage Reduction Amounts] X FTE Reduction Quotient = $153,600
  2. PPP Loan Amount = $200,000
  3. Payroll Cost 60% Requirement = $300,000 ($180,000 / 0.60)

The smallest amount is $153,600. Out of your $200,000 PPP loan, $153,600 is forgivable.

Line-by-line calculation

Line 1: Payroll costs | $180,000

Line 2: Mortgage interest payments | $0.00

Line 3: Rent or lease payments | $10,000

Line 4: Utility payments | $2,000

Line 5: Salary/Hourly Wage Reduction | $0.00

Line 6: Total of lines 1-4, minus line 5 | $192,000

($192,000 – $0.00)

Line 7: FTE reduction quotient | 0.8

12 / 15

Line 8: Modified total, multiplying line 6 by 7 | $153,600

$192,000 X 0.8

Line 9: PPP loan amount | $200,000

Line 10: Payroll cost 60% requirement, dividing line 1 by 0.60 | $300,000

$180,000 / 0.60

Line 11: Pick the smallest number from lines 8, 9, and 10 | $153,600

Again, $153,600 out of your $200,000 PPP loan is forgivable.

Fully forgivable loan

Now, let’s say you received a $200,000 PPP loan. Your average FTEs during the reference period were 15. Your average FTEs during the covered period were 15. You didn’t cut any of your remaining employees’ wages.

Here’s a rough breakdown of what you used the PPP loan for:

  • $155,000 compensation
  • $22,000 health insurance contributions
  • $11,000 state and local taxes assessed on wages
  • $10,000 rent
  • $2,000 utilities

We’ll just stick with a quick calculation for this example.

Quick calculation

Add together your payroll and non-payroll costs:

  • $188,000 (payroll) + $0.00 (mortgage interest) + $10,000 (rent) + $2,000 (utilities) = $200,000

Next, subtract your wage reduction amounts. Because you didn’t reduce wages, your wage reduction amount is $0.00:

  • $200,000 – $0.00 = $200,000 

Now, multiply that number ($200,000) by your FTE reduction quotient. Because you didn’t reduce your FTEs, your quotient is 1.0:

  • $200,000 X 1.0 = $200,000

Finally, select the smallest amount between the following three options:

  1. [(Payroll + Non-payroll Costs) – Wage Reduction Amounts] X FTE Reduction Quotient = $200,000
  2. PPP Loan Amount = $200,000
  3. Payroll Cost 60% Requirement = ~$313,333.33 ($188,000 / 0.60)

The smallest amount is $200,000. The full amount of your PPP loan is forgivable.