Taxable Income

State provided grants to businesses are considered taxable income. Depending on what the grant was for, you may be able to reduce the tax impact of the grant’s taxability. 

If the grant was to provide supplies or equipment, you would be entitled to a deduction equal to the amount of the grant that reimbursed you for the supplies or equipment. If the state provided you with equipment, the grant would be taxable income, but you would be entitled to a business expense deduction for the equipment either through a direct write-off or through depreciation. 

Grants to reimburse for lost revenue will fall directly to the bottom line and create a federal and state tax liability.

For more information, please contact us at 401-831-0200.

February 19, 2021

Would the state grants all be subject to SE tax?

February 19, 2021

The grant income would be combined with the other trade or business income and be subject to self-employment tax.

Generating the grant income would not be considered a separate activity. Thank you for your question.

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