Personal Protective Equipment Tax

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The COVID-19 pandemic has presented unprecedented challenges for small businesses. And one of those challenges? Funding the acquisition of the personal protective equipment (also known as PPE) necessary to keep their staff and customers safe.

Many small businesses are struggling under the weight of PPE costs. But there is legislation being considered that could help to relieve some of that financial burden—the Small Business Personal Protective Equipment Tax Credit Act.

But what, exactly, is the Small Business Personal Protective Equipment Tax Credit Act? What types of PPE would it cover? And how can it help to alleviate the cost burden of PPE for small businesses?

What is the Small Business Personal Protective Equipment Tax Credit Act?

Currently, there are two bills under consideration that could provide business owners with a PPE tax credit: The Small Business Personal Protective Equipment Tax Credit Act and The Healthy Workplaces Tax Credit Act.

The Small Business Personal Protective Equipment Tax Credit Act (H.R. 7216), which was sponsored by Rep. Brenda L. Lawrence (D-MI) and referred to the House Committee on Ways and Means on June 15, 2020, would provide certain businesses a nonrefundable tax credit of up to $25,000 for the cost of PPE.

This tax credit applies to eligible taxpayers/business entities. The types of business entities eligible for the tax credit under the Small Business Personal Protective Equipment Tax Credit Act would include:

  • Small business concerns (defined as businesses with 500 employees or less)
  • Sole proprietors
  • Independent contractors
  • Farms
  • Nonprofits
  • Veterans organizations
  • Tribal business concerns

The Small Business Personal Protective Equipment Tax Credit Act qualifies PPE as any protective gear/equipment that reduces the risk of coronavirus transmission—more specifically, gloves, masks, N95 respirators, closed toe work shoes or boots, gowns, eye protection, hand sanitizers, and cleaning products. The tax credit can also be applied to costs incurred while installing equipment to stop the spread of COVID-19 in the workplace (for example, installing partitions to encourage social distancing).

How would the Small Business Personal Protective Equipment Tax Credit Act benefit small businesses?

The COVID-19 pandemic has been devastating for many small businesses. Not only have many businesses seen a significant slowdown in sales and revenue, but the costs of safely reopening after the shutdown earlier in the year (including the costs of PPE and reconfiguring work spaces safely) have driven additional financial strain—and these unforeseen and unavoidable costs are quickly depleting many businesses financial reserves.

The Small Business Personal Protective Equipment Tax Credit Act aims to ease the financial strain PPE is putting on small businesses by issuing a tax credit to cover some (or all) of the costs of PPE.

So, if you’ve spent $10,000 on masks, gloves, and hand sanitizer for your employees in 2020, the Small Business Personal Protective Equipment Tax Credit could put that money back into your pocket in the form of a tax credit. The tax credit, which could bring your tax liability down to zero dollars, will offset the PPE costs you incurred throughout 2020—so, instead of spending $10,000 on PPE (and taking the financial hit), you’d get a tax break of $10,000 when you file your 2020 taxes—allowing you to recoup those costs and easing the financial strain on your business.

What’s the current status of the Small Business Personal Protective Equipment Tax Credit Act?

The Small Business Personal Protective Equipment Tax Credit Act hasn’t been passed yet—but it is gaining traction in Congress. The bill currently has 43 cosponsors and support from both Democrats and Republicans, but in order to be signed into law, it still needs to make its way through the Committee, the House, and the Senate.

What options to small business owners have if these bills don’t pass?

If the Small Business Personal Protective Equipment Tax Credit Act doesn’t pass, there’s an additional bill being considered that could provide financial relief to small businesses that have incurred significant PPE costs—the Healthy Workplaces Tax Credit Act.

The Healthy Workplaces Tax Credit Act, (H.R. 7615), which was introduced by Rep. Tom Rice (R-S.C.) on July 16, 2020, has a wider definition of what and who is eligible for the tax credit. Under the Healthy Workplaces Tax Credit Act, all employers (including small-business owners) would be eligible for a refundable payroll tax credit totalling 50 percent of the sum of qualified expenses, which fall into three categories:

  • Qualified employee protection expenses, which include COVID-19 testing, cleaning products to prevent the spread of COVID-19 (for example, disinfecting products or cleaning detergents), and equipment to protect employees from contracting COVID-19 (for example, eye protection, gloves, or N95 respirators)
  • Qualified workplace reconfiguration expenses, defined as “amounts paid to design and reconfigure retail space, work areas, break areas, or other employee or customer areas for the primary purpose of preventing the spread of COVID-19” (in order to be eligible, design and reconfiguration must be “completed pursuant to a plan in place before March 13, 2020, and completed before January 1, 2021”)
  • Qualified workplace technology expenses, defined as “amounts paid for technology systems that employees or customers use for the primary purpose of preventing the spread of COVID-19 and limiting physical contact” (in order to be eligible, technology must have been acquired after March 12, 2020 and implemented by January 1, 2021)

While this bill isn’t targeted towards small businesses specifically, if it passes, it could provide financial relief for small businesses struggling with PPE expenses.

It’s too soon to tell—but hopefully, PPE tax relief for small businesses is on the way

There’s no way to know for sure whether the Small Business Personal Protective Equipment Tax Credit Act (or the Healthy Workplaces Tax Credit Act) will make it through Congress. But as small businesses struggle to keep up with PPE costs during this public health crisis, hopefully lawmakers will take note and pass legislation to provide financial relief—and ensure that businesses can continue to both provide PPE and keep their businesses moving forward through the remainder of the coronavirus pandemic.

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