It depends. Generally, grants to individuals are considered taxable unless they meet specific criteria set by the IRS
- Since you received an artist grant from a regional arts council and completed a W-9, it is likely taxable.
- *Specific Criteria for Non-Taxable Grant
- Grants to individuals for travel, study, or other similar purposes are taxable unless:
- Objective and Nondiscriminatory Basis: The grant is awarded on an objective and nondiscriminatory basis under a procedure approved in advance by the IRS and
- Satisfaction of One of the following Requirements:
- Scholarship or Fellowship: Used for study at an educational institution with a regular faculty and curriculum.
- Prize or Award: Excludible from gross income under IRC section 74(b), if selected from the general public.
- Specific Objective: Aimed at achieving a specific objective, producing a report, or enhancing a skill or talent.
If it's Taxable or you are still not sure here’s how you can enter it into TurboTax: TurboTax will guide through a series of questions to help you determine taxability.
- Determine the Type of Income: If the grant was for a specific project and you were required to produce a report or similar product, it is considered taxable income. This type of income is typically reported as self-employment income.
- Form 1099-MISC or 1099-NEC: If you received a 1099-MISC or 1099-NEC, the grant amount should be reported on Schedule C (Form 1040) as business income
Steps to Report in TurboTax
- Open TurboTax and navigate to your tax return.
- Go to the search bar (magnifying glass icon) at the top right of the screen.
- Type "1099-MISC" or "1099-NEC" in the search bar I
- If you did not receive a 1099 - then go to magnifying class at top right of screen and Search for Schedule C and select the Jump to link.
- Click the "Jump to" link that appears in the search results.
- Enter the details from your 1099 form, including the total earnings reported.
- Categorize your income: TurboTax will guide you through categorizing your grant income as self-employment income.
Additional Considerations
- Self-Employment Tax: Since the grant is considered nonemployee compensation, it may be subject to self-employment tax
- Documentation: Keep all documentation related to the grant, including the W-9 and any correspondence with the arts council, in case the IRS requests further information.
*Reach back out if you believe you meet one of the exceptions or received any other supporting tax documents and we can provide further guidance.
Original post.
