Is Grant Money Taxable?

by Elizabeth Layne
Grant money is taxable or not based on the terms of the grant.

If you get grant money, it's good to know how it can be used for your needs and whether you have to pay Uncle Sam. But it all depends on the grant. The Internal Revenue Service has guidelines to follow.

Education Grants

Some grant money for education may be taxable.

Under IRS rules, if you're a candidate for a degree, grants and scholarships for tuition, fees, books, supplies and equipment are not considered taxable income. But grant money used for items beyond those, such as room and board, for example, are taxable.

Disaster Relief Grants

Grant money to help after a natural disaster is generally not taxable.

Government grants for recovery after a natural disaster are intended for reasonable and necessary living expenses, and for reasonable and necessary repairs of a home. But, under IRS terms, you only get to deduct from taxable income the amount for repairs not covered by insurance.

Disaster Mitigation Grants

Disaster mitigation grants are to be used to protect against future natural disasters.

Disaster mitigation payments are commonly made after a natural disaster has already occurred, but they are to be used to take the necessary steps to prevent and reduce the severity of potential future natural disasters. These grants are paid through state and local government agencies.

Veterans' Grants

Veterans' grants are not taxable.

Veterans' grant are not taxable, under IRS regulations. For example, grants to design homes so they are suitable for wheelchair use and grants to provide motor vehicles for veterans who've lost their sight or use of their limbs aren't taxable.

Historic Preservation Grants

The government makes grants availabe tax-free for preservation.

Grants for preservation of historically significant properties, provided under the National Historic Preservation Act are not taxable, according to IRS rules.

Tax Help

Play it safe and get tax advice, if you feel you need it.

There are more grants than the ones listed here. New grants are created over time and IRS rules may change. If you have specific questions, play it safe and contact an Internal Revenue Service agent or tax lawyer.

About the Author

Located in the mid-Atlantic United States, Elizabeth Layne has covered nonprofits and philanthropy since 1997, and has written articles on an array of topics for small businesses and career-seekers. An award-winning writer, her work has appeared in "The Chronicle of Philanthropy" newspaper and "Worth" magazine. Layne holds a Bachelor of Arts in journalism from The George Washington University.

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