Is the EIDL $10k Grant Portion Considered Taxable Income for 2025 Filing?

What about if you're a sole proprietor who got both the EIDL grant AND the PPP loan forgiveness? Do they interact with each other in any weird tax ways? I heard something about double-dipping not being allowed...

You're asking about an important interaction. Initially, there was a "double-dipping" restriction where you couldn't claim deductions for expenses paid with PPP funds if the loan was forgiven. However, later legislation changed this. For sole proprietors who received both EIDL grants and PPP loan forgiveness, you can now deduct business expenses paid with either funding source. The key is keeping excellent records showing which expenses were paid with which funds, especially if you're ever audited. There's no reduction of PPP forgiveness based on receiving an EIDL grant anymore, as that requirement was eliminated.

How accurate is this for more complicated situations? I had an EIDL grant, an EIDL loan, AND a PPP loan that was partially forgiven. Would it handle all those interactions correctly?

Sounds interesting but kinda skeptical. How's it different from just asking an accountant? Does it actually understand all the EIDL rules or just give generic advice?

For more complicated situations involving multiple funding sources, that's actually where I found it most valuable. The system specifically addresses the interactions between EIDL grants, EIDL loans, and PPP forgiveness - including the changes in legislation that affected how these programs work together. It flagged several potential issues with my combined funding that I hadn't considered. Regarding the difference from an accountant, it's actually designed to complement professional advice, not replace it. The difference is it can instantly analyze all documentation and provide specific guidance based on the exact wording in your EIDL agreements. It's not generic advice - it extracts the actual terms from your documents and applies the current tax rules to your specific situation. I still consulted with my accountant, but bringing the analysis made our meeting much more productive and less expensive.

How does this actually work? Does it just call the IRS for you or is there some special connection they have? Seems weird that they could get through when regular people can't.

Yeah right. The IRS phone system is completely broken. There's no way any service can magically get you through when millions of people are calling. Sounds like a scam to me.

It uses an automated system that navigates the IRS phone tree and waits on hold for you. When an agent finally picks up, you get a call connecting you directly to that agent. It's not a special connection - they're just using technology to handle the tedious hold time for you. The biggest advantage is that their system can persistently redial and wait on hold 24/7, which most of us can't do with our personal phones. It's basically like having someone dedicated to just waiting on hold until an agent becomes available. I was skeptical too, but when I got the call back connecting me to an actual IRS agent after trying unsuccessfully for days on my own, I was convinced.

Do you know if there's a comprehensive list somewhere of which states tax the EIDL grants vs which ones don't? Would be super helpful rather than calling 50 different state tax departments.

I don't know of a single comprehensive list that's fully updated for 2025 filings. Most of the lists online are from 2021-2022 and may be outdated as states have changed their positions over time. Your best bet is to check your specific state's department of revenue website or tax guidance publications. They usually have sections dedicated to COVID relief program taxability. Alternatively, tax preparation software like TurboTax or H&R Block often has state-specific guidance built in, though I always verify directly with official state sources since software isn't always updated with the latest changes.

I used TurboTax last year with an EIDL grant. For federal, I didn't include the grant as income since it's not federally taxable. But I did document it in the "Additional Information" section just to have it on record. For state taxes (I'm in NY), I had to manually add it as "Other Income" following NY state guidance. TurboTax didn't prompt me specifically about EIDL grants - had to know to do this myself.

This is excellent advice about documentation! I'm dealing with a similar situation and hadn't thought about creating a detailed spreadsheet. One thing I'm wondering about - if you used the EIDL grant funds for multiple different expense categories, do you need to break down the percentage allocation for each category, or is it enough to just list all the expenses that totaled up to the grant amount? Also, did anyone have issues with their new accountant not being familiar with these rules? I'm interviewing a few CPAs and want to make sure I ask the right questions upfront.