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Topic no. 421, Scholarships, fellowship grants, and other grants

How to report

Generally, you report any portion of a scholarship, a fellowship grant, or other grant that you must include in gross income as follows:

If filing Form 1040 or Form 1040-SR , include the taxable portion in the total amount reported on Line 1a of your tax return. If the taxable amount wasn't reported on Form W-2, enter it on Line 8 (attach Schedule 1 (Form 1040) PDF ).
If filing Form 1040-NR , report the taxable amount on Line 8 (attach Schedule 1 (Form 1040)).

Estimated tax payments

If any part of your scholarship or fellowship grant is taxable, you may have to make estimated tax payments on the additional income. For additional information on estimated tax, refer to Publication 505, Tax Withholding and Estimated Tax and Am I required to make estimated tax payments?

Additional information

For more information, refer to Publication 970, Tax Benefits for Education and Do I include my scholarship, fellowship, or education grant as income on my tax return?

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Are scholarships taxable? Are grants taxable?

Receiving a college scholarship or grant can making paying for college a lot easier and help with your overall budget. But what about your taxes? OK, we know it’s probably not the first thing on your mind. But as tax time rolls around, you may be asking yourself, “Are scholarships taxable? Are grants taxable?”

Are scholarships taxable - graduation cap on money

The good news is that your scholarship and grant are not taxable if the money was for study or research for a degree-seeking student who spent the funds to pay qualified expenses at an eligible educational organization.

Let’s dig into exactly what that means with a few definitions:

A degree-seeking student is one:

Pursuing studies for an associate, bachelor’s, or higher degree at an eligible educational institute,
Enrolled in a program accepted for full credit toward a bachelor’s or higher degree,
Pursuing studies or conducting research to meet the requirements for a professional certification in a recognized occupation, OR
Enrolled in a program accredited by a national recognized accreditation agency and authorized under federal or state law.

An eligible educational organization is one:

Whose primary function is the presentation of formal instruction,
That maintains a regular faculty and curriculum, and
Has a regularly enrolled body of students

Qualified education expenses include:

Tuition and fees required to enroll at or attend an eligible educational institution
Course-related expenses required of all students in your course of instruction. Expenses include fees, books, supplies and equipment (e.g. computers).

Have other student tax filing questions? Be sure to visit our Tax Guide for College Students and find out about student forms that can be filed for free.

Are scholarships taxable income?

If all the above describes your situation, you won’t need to report your grant or scholarship as taxable income on your return.

If that’s not you exactly, then you may find that some or all your award is taxable. Here are a few scenarios where that might apply.

Scholarship or grant income is taxable in the following situations.:

Amounts received for incidental expenses such as room and board, travel, and optional equipment
Amounts for payments for services including teaching, researching, or other services required as a condition of receiving the scholarship

However, National Health Services Corps Scholarships and Armed Forces Health Professions Scholarship and Financial Assistance Program payments, or certain student work-learning service programs aren’t taxable.

Do you have to pay taxes on grants?

Some grants are treated the same as a tax-free scholarship, and the amounts you use to pay for qualified education expenses are tax free.

These include:

Fulbright Grants
Pell Grants
Other Title IV need-based education grants

If you’ve received one of the grants mentioned above and used the money appropriately, the grant money is not taxable.

What about student loans? Any loans you take out to pay for education expenses are tax free, too. Since its money you’ll need to pay back, the amount isn’t included in income. If you’re currently paying back your student loans, you may qualify for the student loan interest deduction .

Get help with your taxable scholarships and grants

If it turns out your scholarships and grants are taxable, don’t worry about getting your taxes done right. At H&R Block, you can find the expertise you need. Whether you file on your own with H&R Block Online or with a tax pro . We’ll be there with you every step of the way.

Free tax filing for students – Did you know some students can file for free with H&R Block? It’s true! Learn more who can file for free with H&R Block Free Online .

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Stipend vs. Scholarship vs. Research Grants - Taxation Methods

To whomever you are, firstly - thank you for contributing to research and development and pursuit of furthering our knowledge of a particular field. Without your efforts and intellectual curiosity, we would be naught for progress as a civilization, and relegated to becoming accountants. Keep up the good work..

Now - let’s examine the taxation of the various grants/monetary stimulus you can receive as a research scientist.

A stipend fully taxable and reported as wages, although W2 not issued;

Scholarship - partially taxable. Amount spent on tuition and qualified education expenses (provide link) not taxable, the remainder is taxable ordinary income. Reported on 1098-T if from USA stipend is treated as a

Scholarships

Scholarships are tax free (excludable from gross income) if you are a candidate for a degree at an eligible educational institution. These payments will not generate a W2, 1099, but if received from a US institution it will be on form 1098-T.

The payment received by the individual will be tax free if it is used for Qualified Expenses.

- Tuition & required fees

- Books/supplies/equipment required for all students in the course

Expenses that are not qualified include life expenses such as room & board and travel. The grant also cannot include payment for services such as teaching, research, or other services as a condition for receiving the scholarship.

There are exceptions to this rule -- if you receive the amount under one of these programs.

- The National Health Service Corps Scholarship Program (NHSC)

- The Armed Forces Health Professions Scholarship and Financial Assistance Program (HPSP)

Fellowship and Research Grants

Generally, research grants is non-taxable (ie - excludable from gross income) if they meet one of the following conditions:

a. The grant qualifies as a prize or award that is excludible from gross income under Internal Revenue Code section 74(b).

In non-legalese, what this means is that the individual could not have made an action to enter the contest of proceeding on their own, the individual is not required to render future services as a condition to receiving the award, and the prize/award is transferred by the payor to a governmental unit or organization.

b. The grant/prize remains non-taxable if the grant's purpose is to achieve a specific objective - ie produce a report or product, or to improve or enhance a literary, artistic, musical, scientific, teaching, or similar capacity, skill or talent of the grantee.

Non-US citizen grants

Generally, academic institutions who issue grants and fellowship payments to Nonresident Aliens (present in the US) - will issue form 1042-S, which will also contain withholding information. The amount of withholding will depend on the visa status of the recipient.

F-1, J-1, M-1, or Q-1 --- a stipend paid to a non-resident alien with these visas will be subject to federal tax withholding at a rate of 14% unless tax treaty relief is available.

Non-US persons with a B visa will have 30% of payments withheld, without provisions for reduction of withholding.

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Tax Guidelines for Scholarships, Fellowships, and Grants

Feb 10, 2021 | Resources

Taxes can be confusing, especially for young adults who have never had to file taxes before. Yet when beginning college, it is important to learn about and understand how scholarships impact your taxes, so that you are prepared at tax time. There are simple guidelines from the Internal Revenue Service (IRS) that help you determine if you will claim all or part of your scholarship amounts as income on your taxes, meaning you are required to pay taxes on them.

Here are the guidelines quoted directly from the IRS. ( Topic No. 421 Scholarships, Fellowship Grants, and Other Grants)

Not Taxable

You’re a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

You must include in gross income:

Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. However, you don’t need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college.

How to Report

Generally, you report any portion of a scholarship, a fellowship grant, or other grant that you must include in gross income as follows:

If filing Form 1040 or Form 1040-SR , include the taxable portion in the total amount reported on the “Wages, salaries, tips” line of your tax return. If the taxable amount wasn’t reported on Form W-2, enter “SCH” along with the taxable amount in the space to the left of the “Wages, salaries, tips” line.
If filing Form 1040-NR , report the taxable amount on the “Scholarship and fellowship grants” line.”

Now that you’ve read the IRS guidelines, you can ask yourself the questions below:

What is the total amount I received from scholarships, fellowships and grants during the tax year I am filing (Jan-Dec)?
Of that amount, what amount did I use for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution?

Example: If your class required that you purchase an I-Pad to complete the course, it could be considered a required expense, but if you bought the I-Pad for convenience and it was not required, it would be considered as taxable income.

Subtract the amount you used for required expenses (question 2) from the total amount of scholarships, fellowships, and grants you received (question 1). That is the amount that you used for incidental expenses, such as room and board, travel, and optional equipment and amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant.

This amount is taxable and must be claimed as income on your taxes.

The IRS has an online assistant you can use to decide how much of your scholarships (if any) are taxable.

There also is a tax credit that may be available to students (for independent students) or your parents (for dependent students) if you got a Form 1098-T from your college. The credit is called the American Opportunity Tax Credit (AOTC). According to the IRS:

“To be eligible for AOTC, the student must:

Be pursuing a degree or other recognized education credential
Be enrolled at least half time for at least one academic period * beginning in the tax year
Not have finished the first four years of higher education at the beginning of the tax year
Not have claimed the AOTC or the former Hope credit for more than four tax years
Not have a felony drug conviction at the end of the tax year”

To claim AOTC, you must complete the Form 8863 PDF and attach the completed form to your tax return.

We know that this is a lot of information and it can be confusing. As you begin to file your taxes, we encourage you to reach out to people in your support system and utilize the resources offered through the IRS. In addition to the resources we have referenced above, the IRS has also partnered with several organizations to help people prepare and file their federal individual income tax returns for free. Typically, you can file your taxes as early as February and they are due in April. Check the IRS website for exact filing dates for this year and if possible, file your taxes early so that you can get your refund faster.

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Understanding the Tax Implications of Grants and Fellowships

For many students, receiving a grant or fellowship can provide a welcome break from increasing student loan debt. They can assist in covering expenses, as well as rewarding a student for their hard work. However, the question may come up whether or not these grants and fellowships have any tax implications for the student who receives them. In order to determine your particular tax liability, it is important to discuss your situation with a tax professional, such as HCS, LLC in North Richland Hills , TX .

What is a Scholarship or Fellowship Grant?

A scholarship is generally a defined amount of funds are paid to the benefit of a student (either undergraduate or graduate) at a particular educational institution to aid in the pursuit of their studies. A fellowship grant, on the other hand, is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.

The amount of a scholarship or fellowship grant will also include the value of the contributed services and accommodations, the amount of tuition, matriculation and other fees, and any amount received in the nature of a family allowance. All of these items are meant to benefit the student in their pursuit of a specific field of study.

Is it Tax Free?

Before you can determine your tax liability, it is important to make sure that the assistance does not fall within the realm of being tax free. Here are the requirements for assistance to be considered tax free for the student taxpayer’s purposes. Keep in mind that a student needs to prove they are a candidate for a degree at what has been determined to be an eligible educational institution.

The fellowship grant or scholarship is tax free if it can meet the following criteria:

It does not exceed your qualified education expenses
It isn’t designated or earmarked for other purposes (such as room and board)
It does not require by its terms that it can’t be used for qualified education expenses
It does not represent payment for teaching, research or other services required as a condition for receiving the scholarship.

So who counts as a candidate for a degree? They must be in college pursing a degree and the institution is accredited and provides an acceptable degree program.

Additionally, the funds received must be used for qualified expenses. A few of these include:

Tuition and fees required to enroll or attend an eligible educational institution
Course related expenses, including fees, books, supplies, and equipment that are required for their courses at the eligible educational institution

Expenses that do not qualify typically include such things as room and board, travel, research, clerical help and equipment that isn’t required for enrollment in or attendance at an eligible educational institution. As a result, you can exclude from your gross income any part of the grant or fellowship used for the qualified expenses, but must include in your income the part that was used for unqualified expenses.

Keep in mind that if you are paid for services such as teaching through a grant or fellowship, those funds must be reported as part of your gross income. However, if you did the teaching with the National Health Service Corps Scholarship Program or The Armed Forces Health Professions Scholarship and Financial Assistance Program then you do not have to treat the funds received as a payment for services.

Reporting Requirements

If your grant or fellowship is tax-free and you did not have any other income to report, then you would not have to file a tax return. On the other hand, if a portion of the grant or fellowship can be deemed taxable, then you will need to file a return to report it and determine your tax liability. This income must be reported even if you did not receive a traditional W-2.

Types of Educational Assistance

Here are a few options for educational assistance, but each of these has their own requirements for eligibility.

Fulbright Grant – a portion may be tax free based on above expenses and criteria
Pell Grants and Need-Based Educational Grants – Tax free as long as they are used for qualified educational expenses
Payment to Service Academy Cadets – Taxable income, will be reported to the taxpayer with a W-2
Veterans’ Benefits – Tax free if received for education, training or subsistence

As you can see, there are many opportunities to receive educational assistance that is tax-free to pursue your education and training.

Click on the link below to contact a tax professional or accountant at HCS, LLC in North Richland Hills , TX , to discuss whether or not your grant or fellowship is part of your taxable income.

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Are Business Grants Taxable?

How to determine if business grants are taxable.

Financial Preparations for Taxable Grants

Finding and Applying for Business Grants

Is grant money taxable income to a business, how are cash grants taxed, are grants reported to the irs, the bottom line.

Small Business

Most business grants are taxable

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

Most business grants are regarded as taxable income, though there are some exceptions. If you are unsure whether your business grant is taxable, you should check the grant agreement, check the Internal Revenue Service (IRS) guidelines, or contact your grant donor or a tax professional.

For most businesses, it makes sense to reserve part of a business grant for tax purposes. Rather than spending all of the grant, you should hold on to part of it to meet your tax liabilities.

Key Takeaways

Most business grants are taxable, with only a few exceptions.
Your business grant agreement will state whether your business grant is tax-exempt; if it doesn’t, it’s best to assume that you’ll have to pay tax on the grant.
If you’re still unsure, you can check the IRS guidelines, or with your grant organization or a tax professional.
It’s best to reserve a portion of your business grant when you first receive it, in order to meet your tax obligations.

The majority of business grants, including government grants , count as taxable income. This means that you’ll have to pay taxes on the money you receive from the grant, effectively reducing the total amount of grant that you receive.

There are some important exceptions to this rule, however:

Nonprofit organizations with 501(c)(3) status are generally tax-exempt, so they don’t pay tax on their income whether this comes from a business grant or another source.
Most of the business grants that were given out as part of the federal government’s COVID-19 relief program were tax-exempt.
Grants received by a member of a federally recognized American Indian tribe are also tax-exempt.

It’s important to ascertain whether a business grant is taxable before you use it. That’s because if you have to pay taxes, this essentially reduces the total amount of the award. It’s best to assume that a grant is taxable, but you can then check a number of sources for information to the contrary.

1. Check the Grant Agreement

Your business grant agreement will outline the terms under which you are given the grant, and will state whether it is tax-exempt. If the grant agreement doesn’t state this, it’s best to assume that you have to pay tax on it.

2. Contact the Funding Organization

The funding organization that gave you the grant should know whether it is tax-exempt. If your grant agreement doesn’t explicitly mention your tax liabilities, you should call your funding organization to check this.

3. Review Federal and State Guidelines

You can also consult the official IRS guidelines on taxable and nontaxable income. The IRS website contains a comprehensive list of what is considered taxable, and can help you to determine your tax obligations.

You should also check your state’s guidelines on taxable and nontaxable income, because these can differ from the federal government’s rules.

4. Consult with a Tax Professional

If you are still unsure about your tax liabilities, or whether your business grant is taxable, you can seek professional help. If you don’t have a business accountant, you can find certified accountants through a number of websites: CPAverify, the Association of International Certified Public Accountants (AICPA), or the National Association of Enrolled Agents (NAEA).

Financial Preparations for Taxable Grants

In the majority of cases, any business grant you receive will be taxable. It’s wise to keep this in mind when you are applying for the grant, and definitely before you spend it. Here are some principles that can make it easier to administer the grant:

Reserve some of the grant for taxes. You should work out in advance how much of the grant you will have to pay in tax, and then set this amount aside. This will avoid you having to find these funds from elsewhere once you’ve filed your taxes.
Include grants in your accounts. Any grants you receive should appear on your tax return. If you exclude them, you may have to pay penalties.
Keep good financial records. You should make sure that your business records are accurate, are up to date, and include any grants you’ve received, whether they are taxable or not.
Research tax deductions. It may be possible to lower the amount of tax that your business pays by taking advantage of tax deductions . This can free up more of the money you’ve received in your business grant.

Many organizations give out business grants, and it can take a significant amount of research to find a grant that your business is eligible for. You should check:

Government grants are offered by both the federal and state governments. Grants.gov is a website with a comprehensive list of federal business grants, and the websites of the U.S. Small Business Administration (SBA) and the State Business Incentives Database are also good resources.
Corporations also give out grants, often to businesses operating in a particular sector. Finding these grants is most often a case of searching online for a grant that is available to your kind of business.
Charities and foundations also give out grants, particularly to businesses owned by underrepresented communities.

Once you’ve found a suitable grant, you can generally apply online for it. You’ll likely have to include some documents to support your application, including a business plan that explains how the grant will help your business to develop.

Once you’ve applied, it’s a case of waiting. Sometimes, it can take months for a donor organization to make a decision on a grant application, and you might have to call them for an update.

Generally, yes. The IRS regards most types of business grants as taxable income, with only a few exceptions.

Cash grants are taxed in the same way as non-cash grants. If your business deals in cash, you should be careful to ensure that your records are accurate. Otherwise, you could be hit with tax penalties.

You need to report any business grant you receive to the IRS as part of your tax return. Failure to do this is considered tax fraud and could have serious consequences.

Most business grants are taxable, with only a few exceptions. Your business grant agreement will state whether your business grant is tax-exempt; if it doesn’t, it’s best to assume that you’ll have to pay tax on the grant.

If you’re still unsure, you can check the IRS guidelines, or with your grant organization or a tax professional. It’s best to reserve a portion of your business grant when you first receive it, in order to meet your tax obligations.

Internal Revenue Service. “ Grants to Individuals .”

Internal Revenue Service. “ Exemption Requirements—501(c)(3) Organizations .”

Thomson Reuters, Tax & Accounting. “ COVID-19 Related Aid Not Included in Income; Expense Deduction Still Allowed .”

Internal Revenue Service. “ CARES Act Coronavirus Relief Fund Frequently Asked Questions .”

Internal Revenue Service. “ Publication 525: Taxable and Nontaxable Income .”

Grants.gov. “ Search Grants .”

U.S. Small Business Administration. “ Grants .”

State Business Incentives Database. “ Homepage .”

Internal Revenue Service. “ Penalties .”

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Research Voyage

Research Tips and Infromation

Are Research Grants Taxable? Tax Implications you Need to Know as a Researcher

Introduction

Distinction between grants intended to cover expenses and grants intended to compensate for time and effort, examples of research grants and their tax implications, research grant tax implications in united states, research grant tax implications in united kingdom, research grant tax applicability in canada, research grant tax applicability in india, professional advice on research grant tax applicability.

Research grants are financial awards given to individuals or organizations for the purpose of conducting research. These grants can be critical for advancing scientific knowledge and improving quality of life, as they allow researchers to conduct studies and experiments that might not otherwise be possible due to lack of funding.

There are several different types of grants, including competitive grants, collaborative grants, travel grants, and equipment and materials grants. Competitive grants are awarded through a competitive application process based on merit, such as the National Science Foundation’s grants for scientific research.

Collaborative grants are awarded to teams or groups of researchers working on a project together, such as a grant for a multi-institutional research project. Travel grants are awarded to cover expenses related to travel for research purposes, such as attending conferences or conducting field research. Equipment and materials grants are awarded to cover the cost of necessary research equipment or materials, such as a grant for a new microscope or research chemicals.

Without research funds, many important scientific discoveries and advancements may never have been made. However, it’s important to understand the tax implications of research grants, as the tax laws related to these grants can be complex and vary depending on the specific circumstances and the laws of the country involved. In the following sections, we will explore the taxation of research grants in more detail and examine how tax laws related to research grants differ between countries.

In case you are not familiar with writing research grant proposals, then please visit my post on Research Grants Uncovered: A Step-by-Step Guide to Funding Your Research Projects . This post will help you in writing powerful research grant proposals in minimal time.

Taxation of Research Grants

Research grants can have different tax applications depending on a number of factors, including the country where the grant is awarded, the type of grant, and the purpose of the grant. Some research grants may be taxable, while others may not be. The taxation of research funds can be determined by several factors, including the specific laws of the country in which the grant is awarded, the terms of the grant agreement, and the purpose of the grant. Some grants may be intended to cover research expenses, such as equipment, supplies, and travel, while others may be intended to compensate for time and effort, such as salary or wages.

A key factor in determining the taxation of research funds is the distinction between grants intended to cover expenses and those intended to compensate for time and effort. Grants intended to cover expenses are generally not taxable, as they are meant to reimburse the recipient for costs incurred during the research project. Examples of expenses that may be covered by research funds include travel, equipment, and supplies.

On the other hand, grants intended to compensate for time and effort are typically taxable. These grants are intended to provide the recipient with compensation for their work on the research project, and are similar to a salary or wage. Examples of grants that may be intended to compensate for time and effort include stipends and fellowships.

The tax implications of grants can vary depending on the specific circumstances of the grant. Here are a few examples:

Research grant to cover expenses: A researcher receives a grant to cover the cost of travel and lodging for a conference related to their research project. This grant would typically be non-taxable, as it is intended to reimburse the researcher for expenses incurred during the research project.
Research grant to compensate for time and effort: A graduate student receives a fellowship to support their research project. The fellowship provides the student with a stipend of $25,000 per year for two years. This stipend would typically be taxable, as it is intended to compensate the student for their time and effort spent on the research project.
Research grant to cover expenses and compensate for time and effort: A researcher receives a grant to cover the cost of equipment and supplies for their research project, as well as a stipend of $10,000 to compensate them for their time and effort. In this case, the grant would likely be partially taxable, with the stipend portion being subject to taxation while the portion intended to cover expenses would not be taxed.

Understanding the taxability of research grants is important for researchers, as failure to properly report grant income can result in penalties and legal consequences. By understanding the factors that determine the taxation of research grants and the different types of grants that may be subject to taxation, researchers can ensure that they comply with tax laws and properly report their grant income.

Tax Laws for Research Grants by Country

The taxation of research grants can vary depending on the specific tax laws of the country where the grant is awarded. Here is an overview of how research grants are taxed in different countries, as well as examples of tax laws related to research grants in the United States, United Kingdom, Canada, and India.

In the United States, research grants are generally subject to taxation unless they are specifically exempted under the tax code. Grants that are intended to cover expenses related to the research project, such as equipment, supplies, and travel, are typically non-taxable. However, grants that are intended to compensate for time and effort, such as stipends and fellowships, are usually taxable.

One notable exemption for grants in the US is the National Institutes of Health (NIH) Grant Policy , which exempts certain types of grants from taxation. For example, NIH grants that are used to cover research expenses, such as equipment, supplies, and travel, are typically non-taxable. However, NIH grants that provide stipends or salaries to researchers may be taxable.

In the United Kingdom, research grants are also subject to taxation unless they are specifically exempted. Grants that are intended to cover research expenses, such as equipment and supplies, are generally non-taxable. However, grants that provide stipends or salaries to researchers may be taxable.

There are also specific exemptions for research grants in the UK, such as the Research Councils UK (RCUK) Grant Policy . Under this policy, grants that are intended to cover research expenses are generally non-taxable, while grants that provide stipends or salaries to researchers may be taxable.

In Canada, research grants are generally subject to taxation unless they are specifically exempted. Grants that are intended to cover research expenses, such as equipment and supplies, are usually non-taxable. However, grants that provide stipends or salaries to researchers may be taxable.

One notable exemption for research grants in Canada is the Natural Sciences and Engineering Research Council of Canada (NSERC) Grant Policy . Under this policy, grants that are intended to cover research expenses are generally non-taxable, while grants that provide stipends or salaries to researchers may be taxable.

In India, research grants are generally subject to taxation unless they are specifically exempted. Grants that are intended to cover research expenses, such as equipment, supplies, and travel, are generally non-taxable. However, grants that provide stipends or salaries to researchers may be taxable.

The Indian government offers certain tax exemptions for research grants. For example, grants awarded by the Department of Science and Technology and the Department of Biotechnology are exempt from income tax. Additionally, grants awarded by the University Grants Commission (UGC) for research purposes are also exempt from income tax.

While the tax laws related to research grants can be complex and vary by country, it’s important for researchers to understand their tax obligations and properly report their grant income. Seeking professional advice from a tax professional or accountant can help ensure compliance with tax laws and minimize the risk of errors or omissions on tax returns.

There are a number of potential consequences of failing to properly report research grant income. For example:

Tax Penalties: Failing to report grant income or inaccurately reporting it can result in penalties and interest charges from tax authorities. Depending on the severity of the error, these penalties can be substantial and can have a long-term impact on a researcher’s finances.
Legal Issues: In some cases, failing to properly report grant income can lead to legal issues, including fines or even criminal charges. This can be particularly problematic for researchers who rely on grant funding to support their work.
Loss of Funding: Researchers who fail to comply with tax laws may also face consequences from funding agencies. Some agencies may require researchers to provide proof of compliance with tax laws as a condition of funding, and failure to comply could result in loss of funding or other negative consequences.

By seeking professional advice from a tax professional or accountant, researchers can ensure that they are properly reporting their grant income and complying with tax laws. These professionals can help researchers identify any tax exemptions or deductions they may be eligible for, and can assist with the preparation of tax returns and other documentation required by tax authorities.

Explore a world of research funding opportunities with scientifyRESEARCH , the open and curated database transforming the way researchers access critical funding information. Break free from traditional paywalls and effortlessly navigate the funding landscape. Visit scientifyRESEARCH’s dynamic hub now by clicking link HERE

Research grants can be an important source of funding for researchers, but it’s important to understand the tax implications of these grants and properly report grant income. Seeking professional advice from a tax professional or accountant can help ensure compliance with tax laws and minimize the risk of errors or omissions on tax returns. This can help researchers avoid tax penalties, legal issues, and loss of funding, and can support the long-term success of their research projects.

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Can Nonprofit Grants Be Taxed?

Reviewed by:

August 4, 2022

Last Updated:

September 6, 2022

Picture this—you have just been awarded a grant! You are able to spend an entire year doing your amazing work, realizing your awesome project, and making a community impact. Congratulations!

But wait—how do you account for this grant when tax time comes? How does a grant award impact nonprofit taxes?

This article will give you all the information and tools you need to build proper allowances for taxes, including what grants are, what their tax implications are, and what that means for you and your nonprofit.

Nonprofit Financial Statement Templates You Can Use

What Is a Grant?

Before we go into the fine details of grant taxation, let’s start off with the basics of what a grant is. From there, we can then explain what nonprofit grants are, and how grants impact nonprofit taxes.

A grant is defined as money, goods, or services given from a grantmaking organization to another entity without an expectation of being repaid. Grants are usually sums of money. Although they can also be “in-kind” opportunities, which means grants in the form of goods or services as opposed to “cash”.

Common categories of grants include:

Federal grant opportunities distributed by the various departments of the federal government
State grants which are administered through state governments
Private foundations (also known as “foundation grants”)
Corporate social responsibility (CSR) grants support from private businesses

While grants are given without an expectation of being paid back, they require a return on investment—or ROI—in terms of measurable benefit to the target area you will use the grant in.

To receive grant funding for programs, a nonprofit will generally need to describe how the funds will be used, the types of services to be provided, the implementation plan, the demonstrated need and impact of the program, and the anticipated outcomes or goals to be met, and the evaluation measures.

To learn more about what types of grants exist for nonprofits, take a look at our article on The Most Common Types of Nonprofit Grants .

For more information about what grants are and the overall grant writing process, check out Grant Writing for Beginners: The Ultimate Guide and What is a Grant Proposal: Grant Writing 101 .

Are Grants Considered Taxable Income?

The answer is: it depends on what sort of organization you are representing, and what type of grant you are focused on.

Note: In this article, we will be focusing on grants and tax law in the United States. International grants will have additional tax implications to consider.

There are many types of grants that are awarded for many different reasons. There are for-profit opportunities, nonprofit opportunities, grants to tribal organizations, grants to research institutions—the list goes on.

The type of grant and the type of organization that is receiving the grant impact the guidance for the tax implications.

For example, COVID-19 grants have specific guidelines that look different from foundation grant guidance, which looks different from research grants to institutions.

As another example, if you are representing yourself as an individual/sole proprietor LLC (e.g. you are the organization) and the grant is not for educational purposes, the grant funds paid to you as a payment/stipend for your grant-related work should be accounted as taxable income.

A good general rule to keep in mind is that all income, regardless of its source, is considered taxable income unless the tax law specifically states an exception.

Since a grant is considered income, it is considered taxable unless the law has provisions that state otherwise. We will explore what that looks like for nonprofit taxes shortly.

Fun fact: if a grant is for expenditures that appear in your profit and loss account and you are deferring the grant income, you most likely would not have a tax liability on the income as it will be matched (canceled out) with its designated expenditure.

For the purposes of this article, we will do a brief overview of what the general grant taxation landscape looks like, and then hone in on nonprofit grants and their specific implications for nonprofit taxes.

Need help finding more grants?

Find and win more grants for your nonprofit! See why thousands of nonprofits trust and use Instrumentl.

What Types of Grants are Tax-Free?

Here’s a snapshot overview of what grants are considered tax-free, why they are considered tax-free, and what it means for you.

Nonprofit Grants

What do we mean when we say “nonprofit” grants? We’re looking at nonprofits defined as 501(c)(3) private foundations.

Every organization that qualifies for tax exemption as a 501(c)(3) organization is considered a private foundation unless it falls into one of the categories specifically excluded from the definition of that term (referred to in section 509(a) of the IRS tax code ).

Nonprofits in the United States are exempt from federal corporate income taxes. Most are also exempt from state and local property and sales taxes.

However, nonprofits are required to pay taxes on income from activities that are unrelated to their mission.

An unrelated business activity (subject to Unrelated Business Income Tax, or “UBIT”) for a nonprofit includes the following characteristics:

It is a trade or business
It is regularly carried out and
It is not substantially related to furthering the exempt purpose of the organization

If the grant is spent on equipment then the grant is not taxable but there is no capital allowance available on the equipment expenditure. A capital allowance is money directed towards long-term business growth and can be deducted each year from overall revenue by way of depreciation.

Qualified Educational Expense Grants

Grants for qualified educational expenses are treated the same as a tax-free scholarship, and the amounts you use to pay for qualified education expenses are tax-free. To be qualified for one of these grants, you must:

Be a candidate for a degree at an eligible educational institution
Use the grant to pay qualified educational expenses, and
Not spend the majority of grant-funded time researching, testing, teaching, etc.

Qualified educational expense grants include Fulbright Grants, Pell Grants, and all Title IV need-based education grants.

COVID-19 Small Business Administration (SBA) Economic Injury Disaster Loan (EIDL) Grants and Grants for Shuttered Venue Operators

The 2020 COVID-19 responded Economic Injury Disaster Loan (EIDL) advance grants of $10,000 for small businesses were not considered taxable income. Additionally, grants for Shuttered Venue Operators (live venues, museums, arts organizations, etc.) were also considered to be tax-free. In some of these unique situations, Covid-19 grant opportunities are tax-deductible nonprofit grants.

Do Nonprofits Have to Issue 1099s for Grants?

The answer is NO.

When it comes to nonprofit taxes, because these funds are considered charitable grants and not designated as payment for services and/or compensation, organizations don’t need to issue 1099s for disbursed grant funds.

Some activities that nonprofits do have to issue 1099s for include:

Payment issued for a non-employee for services performed in the course of the organization's business.
Payment to an individual, partnership, vendor, or estate.

At this point, some of you might be asking: what if I happen to be a grantmaking organization that is also a nonprofit?

The answer to that is that a nonprofit's grants to organizations are taxable expenditures, unless:

The recipients are public charities, and/or
The foundation exercises expenditure responsibility with respect to the grant.

Expenditure responsibility means that the foundation exerts all reasonable efforts and establishes adequate procedures:

To see that the grant is spent only for the purpose for which it is made,
To obtain full and complete reports from the grantee organization on how the funds are spent, and
To make full and detailed reports on the expenditures to the IRS.

General Rules for Nonprofit Grants and Taxes

Like we went over earlier, the general rule for nonprofit grants is that they are considered income in most situations, and therefore are exempt from federal corporate income taxes. Most are also exempt from state and local property and sales taxes, but you would want to check your specific state and municipality to make sure that you are also following local tax laws.

Each state has its own website dedicated to specific rules and regulations for nonprofit taxes, and you might also consider speaking with a certified tax professional in your area to ensure you have all the information that you need. Many firms will offer pro-bono consultation if you are representing a nonprofit organization.

For even more information about how the grants process works, for both tax structure and overall lifecycle, you can read our article How Do Government Grants Work? What You Need To Know , which provides a deep dive into common questions about government-supported grants.

Wrapping Up: Can Nonprofit Grants Be Taxed?

In this article, we explored the basics of rules and regulations for nonprofit taxes and grants. We went over general rules and delved into which categories of grants are considered to be tax-free. We also went over where you can take additional steps to learn more about grants.

Remember that you also want to check out your state and local tax regulations regarding nonprofits to make sure that you have a solid grasp of your specific situation.

Instrumentl is a great place to start as you think about how to account for your newest grant-funded endeavor. We have tons of resources, including articles and webinars, that can answer your questions and help you build your toolkit of resources for your overall grants experience. Check out our blog for more tips on how to thoroughly account for your next grant.

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Are Business Grants Taxable?

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Grants provide free money you don't have to repay — making them a highly desirable form of business funding. However, though they don't require repayment, small-business grants may have tax implications for your business.

Here's everything you need to know.

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Most business grants are taxable

A business grant is usually considered taxable income — unless the tax law calls for some exception. Suppose you're a member of a federally recognized American Indian tribe, for example, and you receive a grant from the tribe to expand your business on or near reservations. In that case, you do not have to include those funds as taxable income [0] Internal Revenue Service . Publication 525 Taxable and Nontaxable Income . Accessed Jun 8, 2022. View all sources .

Typically, however, the money you receive from a small-business grant (regardless of the source) is taxed as income on your federal tax return. In addition, although state tax laws vary, you may also have to report grant funds as income on your state tax returns.

Are COVID-19 relief grants taxable?

In general, COVID-19 relief grants are also considered taxable income for businesses [0] Internal Revenue Service . CARES Act Coronavirus Relief Fund Frequently Asked Questions . Accessed Jun 8, 2022. View all sources . Although these grants are subject to federal taxes, certain COVID-19 relief grants have been issued a tax exemption at the state level.

» MORE: How COVID grants and relief programs impact business taxes

How to determine if your business grant is taxable

If you're unsure if your business grant funding qualifies as taxable income, there are a few things you can do.

Review federal requirements

Although most business grants are subject to federal taxes, you can review federal guidelines to ensure you don't qualify for exemptions. The IRS publishes an annual guide to taxable and nontaxable income and a tax guide for small businesses on its website.

Research state laws

States have individual tax laws, so you'll want to make sure that you research the guidelines in your state to see if you'll need to pay income taxes on your grant money. Some states have economic development corporations or agencies whose websites include tax guidelines for small businesses. You might also consult your state's Department of Revenue website.

Refer to your business grant agreement

Your business grant agreement may outline your tax obligations. Therefore, you'll want to review this document thoroughly before and after receiving your grant funding. Understanding the terms and conditions of your grant agreement and your tax responsibilities can help you create a financial plan and set aside funds to cover your taxes before you spend the money.

Contact your funding organization

If your agreement doesn't include tax information, you need clarification or you have questions about the terms of your grant, you can reach out to your funding organization for assistance. A representative from this organization should be able to discuss your grant and answer any questions you may have.

Work with a business accountant or certified tax advisor

When in doubt, a business accountant or certified tax advisor can help you understand any tax liabilities associated with your grant funding. These professionals may also be able to assist you with other tax issues and general financial planning.

To find a certified business accountant or tax advisor, you can refer to professional tax organizations, such as the Association of International Certified Public Accountants or the National Association of Enrolled Agents . Nonprofits such as SCORE can also connect you with small-business experts and additional resources for free.

» MORE: How to find the right small-business tax advisor

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REVISED APRIL 2024. This document applies to all NIH grants and cooperative agreements for budget periods beginning on or after October 1, 2023.

Ruth L. Kirschstein National Research Service Award, NRSA, institutional research training grants, training grants, stipend supplementation, compensation, other income, concurrent benefits, educational loans or GI bill, NIH loan repayment program, LRP, taxability of stipends, Form 1099

11.3.10 stipend supplementation, compensation, and other income, 11.3.10.1 stipend supplementation.

Recipients may supplement stipends A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. from non-Federal funds provided the supplementation is without any additional obligation for the trainee. An organization can determine what amount of stipend A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. supplementation, if any, will be provided according to its own formally established policies governing stipend A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. support. These policies must be consistently applied to all individuals in a similar training status regardless of the source of funds. Federal funds may not be used for stipend A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. supplementation unless specifically authorized under the terms of the program from which funds are derived. An individual may use Federal educational loan funds or VA benefits when permitted by those programs as described in Educational Loans or GI Bill below. Under no circumstances may PHS funds be used for supplementation.

11.3.10.2 Compensation

NIH recognizes that student or postdoctoral trainees may seek part-time employment coincidental to their training program to further offset their expenses. Fellows and trainees may spend on average, an additional 25% of their time (e.g., 10 hours per week) in part time research, teaching, or clinical employment, so long as those activities do not interfere with, or lengthen, the duration of their NRSA training. Funds characterized as compensation may be paid to trainees only when there is an employer-employee relationship, the payments are for services rendered, and the situation otherwise meets the conditions of the compensation of students as detailed in Cost Considerations-Allowability of Costs/Activities-Selected Items of Cost-Fringe Benefits / IHE Tuition/Tuition Remission in IIA. In addition, compensation must be in accordance with organizational policies consistently applied to both federally and non-federally supported activities and must be supported by acceptable accounting records that reflect the employer-employee relationship. Under these conditions, the funds provided as compensation (salary, fringe benefits, and/or tuition remission) for services rendered, such as teaching, laboratory assistance, or clinical duties are not considered stipend A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. supplementation; they are allowable charges to Federal grants, including PHS research grants. However, NIH expects that compensation from research grants will be for limited part-time employment apart from the normal full-time training activities.

Compensation may not be paid from a research grant that supports the same research that is part of the trainee's planned training experience as approved in the Kirschstein-NRSA institutional research training grant application.

Stipend A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. Supplementation & Compensation. Under no circumstances may the conditions of stipend A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. supplementation or the services provided for compensation interfere with, detract from, or prolong the trainee's approved Kirschstein-NRSA training program. Training PD/PIs must approve all instances of employment on research grants to verify that the circumstances will not detract from or prolong the approved training program.

11.3.10.3 Other Income: Concurrent Benefits

An individual may not receive support under a Kirschstein-NRSA institutional research training grant concurrently with another federally sponsored fellowship or similar Federal or non-Federal award that provides a stipend A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. or otherwise duplicates provisions of the Kirschstein-NRSA award.

11.3.10.4 Other Income: Educational Loans or GI Bill

An individual may accept concurrent educational remuneration from the VA (GI Bill) and Federal educational loan funds. Such funds are not considered supplementation or compensation. In the case of the MARC-U*STAR program, funds from a Pell grant may be accepted as well.

11.3.10.5 Other Income: NIH Loan Repayment Program

Postdoctoral trainees also may be eligible to participate in the NIH Loan Repayment Program .

11.3.10.6 Taxability of Stipends

Section 117 of the Internal Revenue Code (26 U.S.C. 117) applies to the tax treatment of scholarships and fellowships. Degree candidates may exclude from gross income (for tax purposes) any amount used for qualified tuition and related expenses, such as fees, books, supplies, and equipment, required for courses of instruction at a qualified educational organization. Nondegree candidates are required to report as gross income any monies paid on their behalf for stipends A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. or any course tuition and fees required for attendance.

The IRS and Treasury Department released regulations in January 2005 (Revenue Procedures 2005-11) clarifying the student exception to the FICA (Social Security and Medicare) taxes for students employed by a school, college, or university where the student is pursuing a course of study. NIH's understanding is that these final regulations do not apply to or impact Kirschstein-NRSA programs or awards.

The taxability of stipends A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. in no way alters the relationship between Kirschstein-NRSA trainees and recipient organizations. Kirschstein-NRSA stipends A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. are not considered salaries. In addition, trainees supported under Kirschstein-NRSA institutional research training grants are not considered to be in an employee-employer relationship with NIH or the recipient organization solely as a result of the Kirschstein-NRSA support. Interpretation and implementation of the tax laws are the domain of the IRS and the courts. NIH takes no position on what the status may be for a particular taxpayer, and it does not have the authority to dispense tax advice. Individuals should consult their local IRS office about the applicability of the law to their situation and for information on their tax obligations.

11.3.10.7 Form 1099

Although stipends A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. are not considered salaries, the funds are subject to Federal and, sometimes, State taxes. The recipient organization may report such funds on IRS Form 1099, Statement of Miscellaneous Income. Normally, the business office of the recipient organization will be responsible for annually preparing and issuing the IRS Form 1099 for trainees. Recipient organizations are not required to issue the Form 1099, but it is a useful form of documentation of funding received and it serves as a reminder to the trainee that some tax liability may exist. Even if the recipient organization does not issue the Form 1099, trainees are required to report Kirschstein-NRSA stipends A payment made to an individual under a fellowship or training grant in accordance with pre-established levels to provide for the individual's living expenses during the period of training. A stipend is not considered compensation for the services expected of an employee. as income.

Still need to file? An expert can help or do taxes for you with 100% accuracy. Get started

Taxes for Grads: Do Scholarships Count as Taxable Income?

College scholarships provide significant help to students. But, do scholarships count as taxable income? It depends on how they’re used.

Are scholarships taxable?

When are scholarships not taxed, what are qualified educational expenses, when are scholarships considered taxable income, taxable scholarship funds, taxable stipend scholarships, scholarships vs. grants, what tax credits are available to pay for higher education, american opportunity credit, lifetime learning credit, how to maximize your scholarships and tax credits, tax deduction for student loan interest, how can i avoid paying taxes on scholarships.

Key Takeaways

Scholarships that pay for qualified educational expenses at qualified educational institutions generally don’t count as taxable income.
Scholarships are tax-free only if the student is a degree-seeking candidate, attends a qualified educational institution, and the funds are used for qualified education expenses.
Scholarship funds received in excess of your qualified educational expenses may be taxable and might need to be reported in your taxable income.

Typically, scholarships that pay for qualified educational costs at eligible educational institutions aren’t considered taxable income. The same applies to grants received to pay for specific schooling costs. In short, whether scholarships are taxable depends on how much you receive and how you spend the funds. In fact, some scholarships can be at least partially taxable.

The IRS has specific conditions for a scholarship not to be taxed. A scholarship is tax-free only if:

You are a degree-seeking candidate
Attend a qualified educational institution
It doesn’t exceed your qualified education expenses
It isn’t designated for other non-qualified purposes (such as room and board)
It doesn’t represent payment for work or services you’ve performed

The IRS defines a candidate for a degree as someone who either attends primary or secondary school (K-12) or attends college to pursue a degree. Or you can attend an educational institution that:

Provides a program which can be used as full and acceptable course credit toward a bachelor's or higher degree, or offers a training preparation program for students seeking gainful employment in a recognized occupation; and
Has received a nationally recognized accreditation status and is authorized under federal or state law to provide a program of study.

To avoid a scholarship being subject to taxation, you’ll need to spend the funds on qualified educational expenses. Generally, this means tuition and fees required to enroll or attend the eligible educational institution. But it can also include costs such as course-related expenses like fees, books, supplies, and equipment required for courses at the institution.

The key requirement for having scholarships cover these course-related expenses tax-free, is that they must be required of all students in your course. They can’t be optional expenses you elect to pay that aren’t required to satisfy the requirements of the course or educational institution.

You might have some of your scholarship or grant count as taxable income under certain circumstances.

Some scholarship funds are subject to taxation . If you have scholarship money left over after covering your qualified education expenses, you'll need to include that amount as part of your gross taxable income. That means scholarship money counts as income when calculating your tax liability when used to pay for:

Room or board
And other non-qualified expenses (including school supplies not listed as required in your program).

If you have money left over after covering your qualified education expenses and use it on other costs, these funds generally count as taxable income. For example, if you use your scholarship funds for optional reading assignments that don’t go toward satisfying course requirements and aren’t required of every student, they would be subject to taxation.

In some cases, a scholarship is really more of a stipend, providing compensation for services while you’re in school or for services you’ll provide in the future. If, for example:

You receive a $5,000 scholarship with $1,500 of it designated to pay for your teaching services.
The $1,500 typically counts toward your taxable income for the year.
The remaining $3,500 is usually not taxable, as long as you're a degree student at a qualifying institution and the money is used for qualified education expenses.

If you receive a scholarship with the condition that you provide services in the future, you’ll typically need to count the scholarship as income in the year you receive it. Payment for services at a military academy also counts toward your taxable income.

If you receive scholarship funds that exceed your qualifying educational expenses, the amount above these necessary costs is subject to taxation. Likewise, if you receive a scholarship that you use to pay for room and board, books or supplies that aren't required, these funds are generally subject to taxation. Commonly, schools offer scholarships to worthy students, essentially counting as a reduction in the cost of attendance rather than funds given from a third-party.

Scholarships are financial awards often given to students who meet certain need-based criteria or merit-based achievements based on their academic, athletic or extracurricular performance, or on other areas of interest like field of study, hobbies and more. Scholarships aren't like student loans, meaning they don't need to be repaid.

Grants are a form of financial aid that don’t require repayment. Generally, grants are awarded based solely on financial need. One common example is the Pell Grant, which is awarded solely on the difference between the expected cost and family contribution amounts.

Depending on how the student uses scholarship funds, they are typically not considered taxable income. Grants are usually awarded by federal and state governments and are generally not taxable if used for paying qualified expenses to attend an eligible educational institution while pursuing a degree.

TurboTax Tip: Tax credits such as the American Opportunity Credit and the Lifetime Learning Credit can be used to reduce the cost of pursuing post-secondary education.

Scholarships and grants aren’t the only ways to get financial assistance to pay for higher education. The tax code also has two educational tax credits geared toward lowering the cost of pursuing post-secondary education.

The American Opportunity Credit allows students or their parents an opportunity to reduce the cost of attending college through claiming qualifying education expenses as a tax credit on their federal income taxes. The credit reduces the tax you owe on a dollar-for-dollar basis rather than just reducing the amount of income subject to tax as a deduction would.

To claim this education tax credit , the student must be at least a half-time student who hasn’t completed the first four years of college and is working toward a degree. In addition to required tuition and fees, the credit applies to other expenses like books, supplies and equipment, but not room, board, transportation expenses or medical insurance. The credit is equal to 100% of the first $2,000 of qualifying expenses plus 25% of the expenses in excess of $2,000. The maximum credit per student per year is $2,500.

Whether you’re pursuing a college degree, higher education coursework independent of a degree or other educational activities to develop your career, another tax credit to consider is the Lifetime Learning Credit . Like the American Opportunity Credit, this credit also reduces your tax bill on a dollar-for-dollar basis for a portion of the tuition, fees and other qualifying expenses you pay for yourself, your spouse or a dependent to enroll in qualifying coursework. However, this credit doesn’t require you or your dependent to be taking this coursework to satisfy the requirements of a degree.

The Lifetime Learning Credit is equal to 20% of the first $10,000 of spending for a maximum of $2,000.

Another distinction is that you can’t double dip with these two educational credits. That means you can’t claim both the Lifetime Learning Credit and the American Opportunity Credit in the same year for the same student. You need to choose between them.

The American Opportunity Credit is available for each qualifying person on a tax return, while only one Lifetime Learning Credit can be claimed on each tax return.

The IRS has provided some helpful guidance on how to maximize your scholarships and tax credits, delivering you the most savings possible for your situation. One tax optimization strategy works by considering some of your scholarship money as taxable income by using it for living expenses rather than applying it toward your tuition expenses. This can allow for some of your tuition expenses to be eligible for an education credit that otherwise would have been paid by the tax-free scholarship money. In some cases, you might be better off excluding all of the scholarship from your taxable income by applying it only toward tuition expenses. In others, it might make sense to claim some as taxable income and use the tax credits to lower your tax bill.

For example, if you have a grant or scholarship that fully covers all of your tuition, fees, and books, then you can't claim the American Opportunity Credit because you didn't actually pay for qualifying expenses. If, instead, you claim some of the grant or scholarship as income and don’t use it for your eligible expenses, this then leaves you with some qualified expenses to pay and gives you the ability to claim the tax credit. Since up to $1,000 of the American Opportunity Credit is refundable, you can take part of a scholarship and choose to make it taxable income. Then, you can have part of the American Opportunity Credit pay the tax and receive up to $1,000 as a refund without ever having paid any taxes.

Another useful tax deduction you may be able to claim comes from the student loan interest deduction. If you used student loans to finance all or part of your college education, the tax code provides the ability for many borrowers to deduct the interest paid on these student loans.

For 2023, you can deduct the student loan interest paid if your modified adjusted gross income (MAGI) is below $90,000 as a single filer or $185,000 if you file a joint return. The ability to claim the deduction begins to phase out at $75,000 for single filers and $155,000 for joint filers.

For scholarships to be completely tax-free, the money you receive has to go toward paying qualified educational expenses at qualified educational institutions. In some cases, scholarship funds can exceed this amount. Scholarship funds that go toward certain non-qualified expenses like room and board are typically taxable income.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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Use of Research Funds

Guidance on the appropriate use of research funds, office of the provost vice provost for research december, 2018, updated march 2022.

Georgetown University research funds are intended to support a broad range of research activities, according to the guidelines outlined below.

Definitions

For the purposes of this policy, the term “research funds” refers to:

(i) any grant funds received from an external sponsor to support budgeted research activities, and

(ii) other research funds typically held in a faculty member’s research account, including:

Proceeds from Indirect Cost (IDC) charged on external grants that accrue to a faculty member’s research account;
Proceeds from internal grants from the Provost’s Office, or the faculty member’s School or Department, or other sources within Georgetown University;
Other funds, for example from unrestricted gifts, specified for research.

(i) University policies apply to the use of all university funds, including research funds, and should be beneficial to the university.

(ii) Research funds should be used for costs directly related to research and should not be used for personal or other non-research expenses.

(iii) External research funds must be used in a manner consistent with the requirements of the sponsor, and be “reasonable, allocable, and allowable.” For example,

Federal regulations specify what types of carriers are allowable on federal grants, in compliance with the Fly America Act.
Federal funds cannot be used to purchase alcohol under any circumstances.

(iv) Financial prudence should be exercised, and extravagance or the appearance thereof should be avoided.

In the case of non-Federal grants, where permitted by the sponsor, the prudent purchase of alcohol is permitted under the category of “catering,” “meals,” or similar. No special authorization is required, but as with any other expenditure, costs should be contained to reasonable levels.

(v) All assets purchased with research funds remain the property of the university, including equipment, supplies, etc.

(vi) Apart from course buy-outs (see below), and certain dependent care expenses (see next point), expenses that simply provide additional time to faculty are generally not allowed.

(vii) Dependent-care expenses that facilitate conference attendance and other short term research travel are allowable, in accordance with the sponsor’s policies and approval processes, if any* (1)

(viii) Research funds cannot be used to pay for services that are otherwise provided free of charge by the university (e.g., document shredding)

Generally allowable expenditures include, for example:

Books of a scholarly nature
Course buy-outs, with the approval of the department chair or equivalent, and dean
Computer hardware and software, including tablets, laptops, etc., but not including printers. (All purchases should be made via University Purchasing .)
Cell phones that are used predominantly for research activities (but please see below for generally not allowable expenditures)
Clerical and administrative help in the execution of research, in accordance with the sponsor’s policies and processes, if any* (2)
Conference registration fees
Hotel, travel, and subsistence costs associated with the conduct of research
Various library fees, not including late fees and fines
Membership in professional organizations (not allowable on federal grants)
Page charges for articles in scholarly journals; subventions
Scholarly journal subscriptions
Research assistants
Professional development expenses related to the conduct of research

Generally not allowable expenditures include, for example:

Cell phones, the use of which is not tied directly and predominantly to research activities. For the purposes of this exclusion, “research activities” do not include authentication when accessing GU services, establishment of wifi hotspots, checking emails, cursory web searching, and similar basic functions
First class travel (see University travel policy for additional guidance)
Clothing, except for protective and other wear essential for the conduct of research, and academic regalia used in the performance of university functions
Club memberships
Costs of commuting between home and campus
Home or office furniture or décor not related to the conduct of research* (3)
Network connectivity costs
Printers, which are covered by the UIS Printer Service
Newspapers and magazines
Personal digital subscriptions to journals already available via the University library
Salary paid to any faculty member (unless specifically authorized)
Spousal, partner, or other family member travel

(1) The Uniform Guidance, Article 200.474(c)(1)(ii) says that this is allowable “provided that it is consistent with the non-Federal entity’s documented travel policy for all entity travel.” So for Federal grants, this will be an allowable expense once the University’s travel policy is revised.

(2) Clerical help is allowable on Federal awards with the Agency’s prior written approval. There are strict criteria for what information must be included in the proposal or the post-award request for approval.

(3) Research centers and initiatives that are wholly or partly funded by external sources may use their share of the IDC, or direct costs as allowed by the sponsor, to cover items such as furniture and other office expenses. Furniture for individual faculty offices is the responsibility of the relevant department or school.

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Line 13010 – Taxable scholarships, fellowships, bursaries, and artists' project grants

Report amounts that you received as a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by you (other than a prescribed prize) that were not received in connection with your employment or in the course of business, to the extent that these amounts are more than your scholarship exemption. If you received a research grant, see Line 10400 – Other employment income .

Elementary and secondary school scholarships and bursaries are not taxable.

A post-secondary program that consists mainly of research is eligible for the scholarship exemption, only if it leads to a college or CEGEP diploma, or a bachelor, masters, or doctoral degree (or an equivalent degree). Post-doctoral fellowships are taxable.

Scholarship exemption

To claim a scholarship exemption, you must be enrolled in an educational program in which you are a qualifying student in 2022, 2023 or 2024.

Full-time enrolment

Post-secondary school scholarships, fellowships, and bursaries are not taxable if you received them in 2023 for your enrolment in a program for which you are considered a full-time qualifying student for 2022, 2023 or 2024.

The scholarship exemption will be limited to the extent that the award was intended to support the student’s enrolment in the program. To determine what portion of your award was intended to support your enrolment, you should consider such factors as:

the duration of the program
any terms and conditions that apply to the award
the period for which support is intended to be provided by the award

Part-time enrolment

If you have received a scholarship, fellowship, or bursary related to a part-time program for which you are a part-time qualifying student for 2022, 2023, or 2024, the scholarship exemption is limited to the tuition paid plus the costs of program-related materials.

To calculate your scholarship exemption, see Scholarship exemption – Part-time enrolment .

For more information, see Income tax folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance .

I have an amount in box 105 of my T4A slip from a university. I was not considered a qualifying student. Do I have to report this income on my return?

Only the part of the total of all the amounts you received in 2023 (box 105 of your T4A slips) that is more than $500.

Only the part of the total of all amounts you received in 2023 (box 105 of your T4A slips) that is more than $500.

For more information on completing your Income Tax and Benefit Return, go to Guide P105, Students and Income Tax .

Certain scholarship, fellowship and bursaries are not taxable, such as:

elementary and secondary school scholarship and bursaries
post-secondary school scholarship, fellowship, and bursaries received in 2023 if you are considered a full-time qualifying student for 2022, 2023, or 2024

If you received an artists' project grant, you may be able to claim certain exemptions.

For more information, see Students.

Forms and publications

Federal Income Tax and Benefit Guide
Guide P105, Students and Income Tax
Income tax folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance
Income Tax Folio S4-F14-C1, Artists and Writers

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NIH Grants & Funding
Blog Policies

NIH Extramural Nexus

Plan Your Research Career at NIH

Thinking about a career in research or wondering how to move forward in your journey to becoming an independent researcher? Whether you’re an undergraduate or graduate student, a postdoc, early stage or an established investigator, there is an NIH funding program out there for you!

Explore the NIH Funding Programs by Career Stage page to get to know the different programs by career stage, learn useful tips, and better understand the lingo of NIH funding.

Once you identify a program of interest, you can find active funding opportunities with the “View Current Funding Opportunities” button on each program page. When you’re ready to apply, keep our How to Apply – Application Guide handy!

If you have questions along the way, check out our Need Help? page to find the right contact.

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Options for Navigating the 2025 Tax Cuts and Jobs Act Expirations

Executive summary.

Policymakers should have two priorities in the upcoming economic policy debates: a larger economy and fiscal responsibility. Principled, pro-growth tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. policy can help accomplish both.

Congress is staring down the expiration of the Tax Cuts and Jobs Act (TCJA), and Tax Foundation is prepared to provide insight and analysis on the policies at stake. Since its enactment in 2017, the Tax Foundation team has studied the TCJA’s underlying construction and resulting strengths and weaknesses. We have also analyzed fundamental reforms that would dramatically improve the U.S. tax system to support economic growth as well as greater efficiency and simplicity.

Whether lawmakers target fundamental tax reform or follow the outline of the TCJA, they will confront decisions on what to prioritize in this forthcoming round of tax reform. In that regard, staying within the overall TCJA construct, the Tax Foundation team has analyzed difficult, but revenue-neutral ways to build a pro-growth set of reform options that would not significantly worsen the deficit once changes to the economy are considered or substantially change the distribution of the tax burden across the income scale.

The alternative reform options outlined in this paper may not be politically popular, but they would grow the economy and provide sufficient revenue to avoid significantly increasing our nation’s debt. The two alternative options would further broaden the tax base The tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. for individual income (more so than the TCJA), maintain much of the individual rate cuts from that law, improve the business tax base to support investment, and maintain the corporate tax rate of 21 percent.

Both reform options would provide working families and businesses with more long-term certainty than the current expiring tax code and remove many of the tax code’s special interest provisions.

The options prioritize provisions that have the largest “bang for the buck,” or the most economic growth per dollar of revenue loss. These include immediate cost recovery Cost recovery is the ability of businesses to recover ( deduct ) the costs of their investments. It plays an important role in defining a business’ tax base and can impact investment decisions. When businesses cannot fully deduct capital expenditures, they spend less on capital, which reduces worker ’s productivity and wages. for investments in the types of machinery and equipment upon which millions of small and large businesses depend, as well as immediate write-offs for investments in research and development. These two policy changes support a growing economy like no other tax policies proposed since the corporate tax rate was reduced from 35 percent to 21 percent. The options would also extend better cost recovery to investments that are currently excluded, resulting in more neutral tax treatment across assets.

The options in this paper show that pro-growth tax reform that does not add to the deficit requires tough choices. If lawmakers do not like the types of choices represented here, there are still other pro-growth options to achieve similar goals. Tax Foundation has modeled several alternative options over the last year. Our primary concern is not to endorse any of the specific policy options here, but to provide a resource to lawmakers so they can create sound tax policy.

With respect to the two options in this paper, the first would support an economy that is 1.4 percent larger in the long run and reduce the long-run debt-to-GDP ratio by 1.7 percentage points compared to what would happen under current law. The second option would have somewhat smaller impacts with an economy that is 0.9 percent larger and a debt-to-GDP ratio that is 0.1 percentage points larger.

Working families and businesses deserve a tax code that prioritizes growth and fiscal responsibility. This paper demonstrates multiple ways to reach those goals without substantially changing the distribution of the tax burden. These options can help Congress as lawmakers begin the difficult work of designing legislation to prevent an automatic, detrimental tax hike at the end of 2025.

Key Findings

Unless Congress acts, the vast majority of Americans will see higher, more complicated taxes beginning in 2026 as major provisions from the Tax Cuts and Jobs Act of 2017 expire.
The TCJA reduced average tax burdens for taxpayers across the income spectrum and temporarily simplified the tax filing process through structural reforms. It also boosted capital investment by reforming the corporate tax system and significantly improved the international tax system.
If Congress fully extends the individual, estate, and business provisions, federal tax revenues would fall by more than $4 trillion on a conventional basis and by nearly $3.5 trillion on a dynamic basis over the coming decade; and without spending cuts, debt and deficits would increase.
At a time of already high national debt, rising deficits, and higher interest rates, Congress should exercise fiscal responsibility when deciding how to extend the expiring changes.
The decision process should be guided by promoting growth and critical principles of sound tax policy: simplicity, neutrality, transparency, and stability.
Lawmakers must avoid economically counterproductive approaches to fiscal responsibility, such as paying for individual income tax An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment . Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. cuts with higher taxes on business investment or trade.
Tax Foundation outlines two approaches that illustrate possibilities and difficult trade-offs for designing a pro-growth and fiscally responsible extension of the TCJA without raising taxes on investment or trade.

Lawmakers Will Have to Reform the Tax Code in 2025

The 2017 Tax Cuts and Jobs Act (TCJA) reduced average tax burdens for taxpayers across the income spectrum by temporarily changing the structure of the individual income tax, including lower rates, wider brackets, a larger standard deduction The standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act ( TCJA ) as an incentive for taxpayers not to itemize deductions when filing their federal income taxes . and child tax credit A tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. in lieu of personal and dependent exemptions, and limitations on itemized deductions. The reforms also reduced the individual income tax compliance burden by making it more advantageous for most filers to take the standard deduction and by eliminating the complexity of calculating their taxes again under the alternative minimum tax for millions of filers. Those changes all expire at the end of 2025, along with several TCJA business provisions over the next several years.

2025 Tax Reform Options for Tax Cuts and Jobs Act TCJA Expirations Timeline

Absent congressional action, the tax system will largely revert to its previous structure, placing a higher and more complex tax burden on most people, as well as a higher tax burden on investment. Extending all the changes would greatly reduce federal tax revenue when debt is already high and deficits are rising.

As lawmakers face the challenge posed by the upcoming expirations, they should be guided by the principles of sound tax policy: simplicity, neutrality, transparency, and stability. Weighing how each provision affects individuals’ tax burdens, federal revenue, the complexity of today’s income tax system, and, most importantly, the effects of taxes on economic growth, will help prioritize which provisions should be permanent and how they should be funded.

One looming threat is that Congress will offset the cost of extending the individual tax cuts by hiking economically harmful taxes elsewhere. Several proposals have already surfaced suggesting higher taxes on corporations, investment, work, and saving to pay for continuing the TCJA’s lower taxes for individuals. Elsewhere, higher tariffs (taxes on U.S. purchases from foreign businesses) have been proposed to offset the cost of individual tax cuts. While such proposals may offset the fiscal cost of TCJA extensions, they would worsen incentives for productive activity in the United States and impose significant economic costs on the same taxpayers they purport to help. The expirations in 2025 should not be used to further riddle the tax code with distortions, redistributions, and economically harmful provisions to pay for tax breaks for some at the expense of economic growth for all.

Instead, lawmakers should use the opportunity in 2025 to further simplify and improve the tax code. Broadening the individual income tax base and ensuring permanence for better cost recovery provisions and lower tax rates would make the system more pro-growth without significantly reducing federal revenues or harming incentives to work and invest.

Ideally, tax reform would reach farther than the TCJA provisions alone. Tax Foundation has outlined several options for fundamental reform, including moving to a flat individual income tax paired with a distributed profits tax A distributed profits tax is a business-level tax levied on companies when they distribute profits to shareholders, including through dividends and net share repurchases (stock buybacks). , as other nations have successfully implemented, as well as moving to a consumption-based business profits and household compensation tax. Such reforms would go beyond the TCJA’s changes to the income tax system and move instead toward a consumption tax A consumption tax is typically levied on the purchase of goods or services and is paid directly or indirectly by the consumer in the form of retail sales taxes , excise taxes , tariffs , value-added taxes (VAT) , or an income tax where all savings is tax- deductible . system. However, short of the consumption tax reform ideal, policymakers should avoid economically counterproductive tax hikes on business, trade, and investment to offset the cost of individual tax cuts. We illustrate two better options that primarily rely on base broadeners to pay for TCJA-like extensions.

The Expiring Tax Provisions

The TCJA adjusted tax bracket A tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat . thresholds and widths to reduce marriage penalties and reduced five of the seven individual income tax rates. Rates fell from 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent to 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent.

The TCJA reconfigured tax adjustments for household size, shifting tax benefits toward lower- and middle-income households with roughly revenue-neutral adjustments to the standard deduction, personal and dependent exemptions, and the child tax credit (CTC). Specifically, the TCJA:

Increased the standard deduction from $6,350 to $12,700 for singles and from $12,700 to $25,400 for married joint filers in 2018, adjusted annually for inflation Inflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “ hidden tax ,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power.
Increased the CTC from $1,000 to $2,000, with the maximum refundable portion increased from $1,000 to $1,400 in 2018, adjusted for inflation until it reaches $2,000; lowered the CTC phase-in threshold from $3,000 to $2,500; and lifted the phaseout thresholds from $75,000 to $200,000 for single filers and from $110,000 to $400,000 for married couples filing jointly
Created a nonrefundable $500 credit for certain dependents who do not meet the CTC eligibility guidelines
Suspended the personal exemption, which had previously allowed households to reduce their taxable income Taxable income is the amount of income subject to tax , after deductions and exemptions . For both individuals and corporations, taxable income differs from—and is less than—gross income. by $4,050 for each filer and dependent, adjusted annually for inflation

To simplify the tax system and offset part of the cost of the rate reductions, the TCJA reduced itemized deductions by:

Lowering the cap on home mortgage interest deductions from $1 million in principal to $750,000 and making interest on home equity debt nondeductible
Introducing a $10,000 limitation on the itemized deduction Itemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction . Itemized deductions include those for state and local taxes , charitable contributions, and mortgage interest . An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers. for state and local taxes paid
Suspending miscellaneous itemized deductions such as casualty and theft losses

The TCJA also simplified the tax system by significantly reducing the number of households caught up in the alternative minimum tax (AMT) by increasing the AMT exemption and the exemption phaseout thresholds and by repealing the Pease limitation on itemized deductions.

For noncorporate businesses, the TCJA established a temporary 20 percent deduction that effectively reduced marginal tax rates by 20 percent. The pass-through deduction is subject to several complex limitations that restrict the benefit of the provision for high-income households.

The TCJA also introduced a limitation on excess business loss deductions for noncorporate businesses. It disallows losses that exceed income by more than $250,000 for single filers and $500,000 for joint filers. The thresholds adjust for inflation each year. The limitation was scheduled to be in effect from 2018 through 2025 but it was postponed to tax years beginning after 2020 during the coronavirus pandemic. The American Rescue Plan Act (ARPA) of 2021 then extended the limitation through 2026 and the Inflation Reduction Act (IRA) of 2022 extended the limitation through 2028.

The TCJA doubled the estate tax exemption A tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the Internal Revenue Service ( IRS ), preventing them from having to pay income tax. from $5.6 million in 2017 to $11.2 million in 2018, adjusted for inflation moving forward.

For corporate businesses, the TCJA permanently reduced the corporate tax rate to 21 percent, from a previous top rate of 35 percent. [1] The TCJA temporarily enacted full expensing Full expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. for most short-lived business investments, such as equipment and machinery, through a provision known as 100 percent bonus depreciation Bonus depreciation allows firms to deduct a larger portion of certain “short-lived” investments in new or improved technology, equipment, or buildings in the first year. Allowing businesses to write off more investments partially alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. . The provision began phasing out by 20 percentage points each year after the end of 2022 and will fully expire after the end of 2026.

To offset the long-run cost of the lower corporate tax rate, the TCJA introduced requirements to amortize research and development (R&D) expenses over five years for domestic R&D and 15 years for foreign-sited R&D beginning in 2022 and limit deductibility of interest expenses initially based on earnings before interest, taxes, depreciation Depreciation is a measurement of the “useful life” of a business asset, such as machinery or a factory, to determine the multiyear period over which the cost of that asset can be deducted from taxable income . Instead of allowing businesses to deduct the cost of investments immediately (i.e., full expensing ), depreciation requires deductions to be taken over time, reducing their value and discouraging investment. , and amortization (EBITDA). Since 2022, the interest limitation has become significantly tighter due to a switch from EBITDA to earnings before interest and taxes (EBIT).

R&D amortization, tighter limits on interest deductions, and the phaseout of bonus depreciation are all policies put in place by the TCJA to reduce or offset the cost of the corporate provisions.

Making the TCJA permanent thus entails restoring the individual, noncorporate, and estate tax An estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits , at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. reforms as well as 100 percent bonus depreciation, R&D expensing, and the EBITDA-based interest limitation.

Economic and Revenue Effects of TCJA Permanence

In all, making the TCJA permanent would boost long-run GDP by 1.1 percent and employment by 913,000 full-time equivalent jobs, while reducing revenue by $4.0 trillion on a conventional basis. Though TCJA permanence would be pro-growth, it would still result in significant revenue losses on a dynamic basis, amounting to $3.5 trillion over the 10-year budget window. In the long run, TCJA permanence would increase the debt-to-GDP ratio by 25.5 percentage points conventionally and 19.0 percentage points dynamically.

TCJA permanence would increase after-tax incomes across all income groups on a conventional and dynamic basis. In 2026, taxpayers would see an average increase of 2.9 percent in their after-tax incomes; the bottom quintile’s increase would be slightly below the average at 2.2 percent while the top quintile would be above the average at 3.4 percent.

At the end of the budget window, the average increase in after-tax incomes would be 2.3 percent, slightly smaller because the one-time increase in revenue costs from transitioning to better cost recovery would have faded. On a dynamic basis, after-tax incomes would increase by 3.0 percent on average.

Because TCJA permanence would be a substantial tax cut, all income groups would see increases in their after-tax incomes, on average, on a conventional basis. In addition to the tax cuts, because TCJA permanence would increase economic output, taxpayers across the income spectrum would see higher pre-tax incomes on a dynamic basis under the larger economy.

Analyzing the TCJA’s Bang for the Buck

Altogether, we estimate the 10 tax cuts (lower rates and brackets, larger standard deduction, larger child tax credit and other dependent credit, the pass-through deduction, Pease limitation repeal, AMT changes, estate tax changes, EBITDA, 100 percent expensing, and R&D expensing) would reduce federal tax revenue by $7.4 trillion. The four base broadeners (SALT cap, other itemized deduction limitations, personal exemption repeal, noncorporate loss limitation) partially pay for the tax cuts by raising nearly $3.4 trillion.

Not every dollar of the $7.4 trillion in lower taxes has the same effect on economic growth or tax compliance and administration costs. The most pro-growth provision by far is permanence for 100 percent bonus depreciation, illustrating how improving investment incentives creates the most economic return for each dollar of tax revenue forgone. Indeed, recent studies have determined that the TCJA’s corporate tax reforms, including lowering the corporate tax rate and providing 100 percent bonus depreciation, significantly boosted investment in the United States. [2]

Improving Tax Treatment of Investment Leads to Most Economic Growth 2025 Tax Reform Options Tax Cuts and Jobs Act Expirations

Of course, economic growth is not the only metric by which to judge a tax provision. For example, the alternative minimum tax requires taxpayers to calculate their tax liability the ordinary way, then again for AMT purposes. Taxpayers must add back several ordinary tax deductions, then subtract an AMT exemption, determine whether they are subject to the phaseout of the AMT exemption, and then calculate their tax liability under the AMT rates (of 26 percent and 28 percent) and pay whichever tax is highest.

Because the AMT rates are lower than ordinary rates, taxpayers caught up in the alternative system face lower marginal tax rates, but they also face a much higher compliance burden and potentially higher average tax rates. Past IRS estimates indicate an average compliance burden of more than 12 hours per taxpayer subject to the AMT, and the TCJA’s changes reduced AMT filers from 5 million in 2017 to 244,000 in 2018. [3] Likewise, the TCJA’s larger standard deduction, combined with limitations on itemized deductions, further simplified the tax system by reducing the number of filers who itemize their deductions. The Joint Committee on Taxation (JCT) estimated the number of itemized filers would decline from 46.5 million in 2017 to just over 18 million in 2018, implying nearly 30 million households would find it more advantageous to take the standard deduction. [4]

On the other hand, some tax cuts, such as the pass-through deduction and the more generous deduction for interest expenses, increase economic growth but raise other concerns regarding neutrality and simplicity. For example, the argument for including the pass-through deduction, which reduced the tax rates faced by noncorporate businesses, in the TCJA was to achieve parity with the rate reductions C corporations received. But rather than parity, estimates of effective tax rates by business type show that noncorporate businesses face lower marginal tax rates than corporate businesses, in large part due to the pass-through deduction. [5]

Limiting interest deductibility continues to be a worthwhile policy goal, as it moves the tax base closer to one on consumption and scales back the tax bias for debt over equity.

Accordingly, considerations in addition to growth, including the effects on complexity, compliance costs, and administrative costs, should guide lawmakers as they consider what to include in a tax reform package.

Alternatives for Extending the TCJA

In 2025, lawmakers will debate how to prioritize better cost recovery for business investment, lower individual rates and a broader tax base, and changes to family provisions. Tax Foundation believes a top priority should be to craft a tax reform package that prioritizes economic growth and moves the tax code toward simplicity, transparency, neutrality, and stability.

The first alternative we model, i.e., Option 1, focuses on the policies changed by the TCJA. It starts with permanence for 100 percent bonus depreciation and R&D expensing and expands better cost recovery to structures with the policy of neutral cost recovery. Neutral cost recovery would retain the current depreciation schedules for structures (27.5 years for residential real estate and 39 years for commercial real estate) but would augment the depreciation deductions with adjustments for inflation and the time value of money. In real terms, the neutral cost recovery adjustments hold companies harmless for having to wait to take deductions. Option 1 also eliminates all green energy tax credits and the newly enacted 15 percent corporate alternative minimum tax (CAMT).

For individual income taxes, Option 1 retains the TCJA’s CTC and personal exemption changes. It expands the standard deduction, reduces tax rates, and alters tax brackets, but all to a slightly smaller degree than the TCJA to reduce the revenue cost of the tax reductions.

To offset the cost of the reductions, Option 1 fully eliminates all Schedule A itemized deductions, which also significantly simplifies the structure of the tax. Building on the simplification, it fully eliminates the individual AMT. To reduce marriage penalties, it sets the head of household brackets and standard deduction equal to single filer thresholds.

Option 1 makes the TCJA’s increase in the estate tax exemption permanent, switches the limitation on interest back to EBITDA but at a lower percentage (17 percent instead of 30 percent), and allows both the Section 199A pass-through deduction and non-corporate loss limitation to expire.

The second alternative we model, i.e., Option 2, incorporates all the changes from Option 1, then further broadens the individual income tax base by ending the income tax exclusion for employer-provided fringe benefits, most notably health insurance. The additional revenue from ending the exclusion offsets the cost of making the CTC fully refundable and further lowering individual income tax rates and widening brackets.

Both Option 1 and Option 2 illustrate the tough trade-offs lawmakers will face in 2025, even short of pursuing a more comprehensive overhaul of the entire tax system. The biggest challenge lawmakers will face is that while broadening the tax base reduces distortions and complexities and offsets the fiscal impact of rate reductions, it also imposes costs on the narrow groups of taxpayers currently benefiting from each provision.

Permanence for the TCJA would increase the 10-year deficit by more than $4 trillion conventionally and $3.5 trillion dynamically, before added interest costs. By contrast, Option 1 and Option 2 would reduce revenue by a much smaller magnitude on a conventional basis, by $488.5 billion and $182 billion over 10 years. On a dynamic basis, both options would be approximately revenue neutral over the budget window. And though the revenue impact between TCJA permanence and the options is markedly different, both options have a positive effect on the long-run economy. Option 1 would increase long-run GDP by 1.4 percent and Option 2 by 0.9 percent. The larger economy and revenue-neutral impact on a dynamic basis together would lead to a 1.7 percentage point reduction in the debt-to-GDP ratio over the long run under Option 1 and a very slight increase of 0.1 percentage points under Option 2, measured on a dynamic basis.

On average, after-tax income After-tax income is the net amount of income available to invest, save, or consume after federal, state, and withholding taxes have been applied—your disposable income. Companies and, to a lesser extent, individuals, make economic decisions in light of how they can best maximize their earnings. would rise for all quintiles under both options, by 0.5 percent conventionally under Option 1 and from 0.3 percent to 0.4 percent conventionally under Option 2. Under Option 1, in 2026, the 80 th to 95 th percentile would see a reduction in after-tax income on a conventional basis, and under Option 2, the 80 th to 99 th percentile would see a reduction in after-tax incomes in 2026. On a long-run dynamic basis, all groups would see increases in after-tax income by 1.6 percent on average under Option 1 and by 1.1 percent under Option 2.

Fundamental Tax Reform Options

Even after the reforms made by the TCJA, the U.S. tax system still closely resembles a broad income tax, generally taxing a person’s current earnings (whether spent or saved) plus the change in the value of their existing assets (such as dividends, capital gains, interest, etc.). By taxing income this way, the tax system places a higher tax burden on future or deferred consumption. Taxing income also requires complicated determinations on how to define income, which increases the complexity of the tax code and makes it harder for families to file their taxes and claim certain tax benefits.

In some cases, however, the tax system adopts provisions like retirement savings accounts for individuals and investment deductions for businesses that eliminate double taxation Double taxation is when taxes are paid twice on the same dollar of income, regardless of whether that’s corporate or individual income. for specific forms of saving and investment. These provisions, however, are limited and complex.

Both options outlined above retain the general structure of the income tax, albeit with marked improvements such as better deductions for business investment and reduced (or eliminated) itemized deductions. Full cost recovery moves the business tax code closer to a consumption-based tax but it does not remove the tax bias against saving at the individual level.

A more fundamental reform would move away from the income tax system and replace it with a consumption tax system. Table 6 illustrates the economic, revenue, and distributional differences of two comprehensive reforms proposed by Tax Foundation.

The first proposal would replace the entire business income tax system with a 20 percent distributed profits tax resembling Estonia ’s tax system and make significant reforms to individual, capital gains, and estate taxes, including a flat rate of 20 percent on individual income to match the distributed profits tax rate. [6]

The second proposal would replace the current business and individual income tax systems with a modified value-added tax, applying a 30 percent rate to destination-based cash flow of businesses and a progressive tax A progressive tax is one where the average tax burden increases with income. High-income families pay a disproportionate share of the tax burden, while low- and middle-income taxpayers shoulder a relatively small tax burden. ranging from 10 percent to 30 percent on household compensation. [7] Both reforms would significantly simplify the tax system, move toward a consumption tax base, and reduce tax penalties on work, saving, and investment. With changes to tax rates, either plan could be made more progressive and raise more revenue, with relatively smaller economic trade-offs because the tax base would be appropriately designed.

As lawmakers look to change the tax system in 2025, pursuing more comprehensive tax reform offers more significant economic and simplification benefits and can be done in a fiscally responsible manner. The distributed profits tax plan would substantially boost revenue within the budget window; in the long run, it would lose revenue on a conventional basis and be slightly revenue raising on a dynamic basis. The larger economy and increased tax revenue together would result in a reduction in the debt-to-GDP ratio of 9.2 percentage points over the long run, on a dynamic basis. The household compensation and business profits tax would lose revenue within the 10-year budget window, but would be revenue neutral on a conventional basis and revenue raising on a dynamic basis in the long run. The plan would have a small impact on the debt-to-GDP ratio over the long run, increasing it by 1.5 percentage points.

The upcoming expirations of the 2017 Tax Cuts and Jobs Act provide lawmakers the opportunity to build on what the TCJA did well and avoid some of its pitfalls. The TCJA boosted investment, simplified the tax filing process, and cut taxes for households across the income spectrum.

Rising deficits, debt, and interest rates should push lawmakers toward a more fiscally responsible approach than in 2017, but they must exercise caution when evaluating how to pay for tax cuts. The principles of simplicity, neutrality, stability, and transparency should guide the debate, and the end goal should be a tax code that is less harmful to economic growth and supports fiscal responsibility.

The best outcome would be a comprehensive reform of the income tax system toward a consumption tax system. Short of that, lawmakers should at a minimum aim to reduce tax preferences and broaden the tax base to offset the costs of TCJA extensions, rather than raising economically harmful taxes on corporations, international trade, or high-income individuals to pay for a continuation of TCJA policies. The goal of any tax reform should be to improve incentives for Americans to work, save, and invest, and to significantly simplify the complex process people face in complying with the current tax system.

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[1] The TCJA also moved the international tax system toward a territorial one by exempting foreign profits from domestic taxation and creating anti-base erosion provisions targeted at high-return foreign profits, intangible income, and income stripped out of the United States. The four main components of the new international tax system are the participation exemption, GILTI, FDII, and BEAT, and the latter three provisions are scheduled to become more restrictive after the end of 2025. A forthcoming Tax Foundation publication will discuss international tax policy options.

[2] Gabriel Chodorow-Reich, Matthew Smith, Owen Zidar, Eric Zwick, “Tax Policy and Investment in a Global Economy,” National Bureau of Economic Research, March 2024, https://www.nber.org/papers/w32180.

[3] Demian Brady, “Tax Complexity 2021: Compliance Burdens Ease for Third Year Since Tax Reform,” National Taxpayers Union, Apr. 15, 2021, https://www.ntu.org/foundation/tax-page/tax-complexity-2021-compliance-burdens-ease-again-after-tcja.

[4] The Joint Committee on Taxation, “Tables Related to the Federal Tax System as in Effect 2017 Through 2026,” Apr. 24, 2018, https://www.jct.gov/publications.html?func=startdown&id=5093 .

[5] Kyle Pomerleau, “Section 199A and ‘Tax Parity,’” American Enterprise Institute, Sep. 12, 2022, https://www.aei.org/research-products/report/section-199a-and-tax-parity/.

[6] William McBride, Huaqun Li, Garrett Watson, Alex Durante, Erica York, and Alex Muresianu, “Details and Analysis of a Tax Reform Plan for Growth and Opportunity,” Tax Foundation, Jun. 29, 2023, https://taxfoundation.org/research/all/federal/growth-opportunity-us-tax-reform-plan/.

[7] Erica York, Garrett Watson, Alex Durante, and Huaqun Li, “How Taxing Consumption Would Improve Long-Term Opportunity and Well-Being for Families and Children,” Tax Foundation, Oct. 12, 2023, https://taxfoundation.org/research/all/federal/us-consumption-tax-vs-income-tax/.

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Dr. Nick Solomey, professor of physics at Wichita State University, and Tyler Nolan, graduate student of physics, show off the prototype radiation detector, which could replace the current three separate detectors currently in deployment if their research is successful, bathed in UV light. The researchers earned a grant to study the detector's effectiveness at measuring harmful cosmic radiation for future human moon and Mars missions.

Wichita State professor and student earn NASA grant to explore harmful cosmic radiation

By Caelin Bragg

As humanity begins to return to the moon and farther beyond, new technologies will need to be invented to assist in sustainable, long-term human-helmed missions. To help develop this technology, NASA has awarded a $133,342 grant to Wichita State University to research a more cost-effective detector for harmful radiation from space.

The grant is part of a nearly $1.5 million program that is funding 24 projects across 21 organizations and institutions. Awardees will also work with NASA’s Marshall Space Flight Center in Huntsville, Alabama as part of the grant.

The one-year study from WSU, conducted by Dr. Nick Solomey, professor of physics, and graduate student Tyler Nolan, in the Master of Science in physics program , will explore the use of a new detector of harmful cosmic radiation, including an ionization detector of charged particles; a gamma detector for X-rays and gamma rays; and a neutron detector.

Currently, detectors for each of these types of radiation are their own bulky machinery that take up space and consume their own power. The researchers hope to develop a single detector that not only takes less power and occupies less space but is an even more accurate detector than what is currently used.

“Every time you put something into space, it’s $10,000 per pound in fuel,” Solomey said. “So if you’re putting three bulky things up, and you make it into one, that’s three times less mass and three times less fuel to go up.”

Research began with computer simulations, which showed promising results for the new detector. The next step of the research, including what the grant will fund, is controlled testing of the detector here on Earth to demonstrate the detector’s effectiveness.

If the experiments are successful, next steps can include another grant for a study of the detector on the International Space Station, next to the current separate detectors, to further test its capabilities and potential deployment on future moon/Mars missions, though Nolan looks forward to seeing whatever the results show.

“Regardless of what you do in science, whether it fails or succeeds, there’s always a lesson that you learn,” said Nolan.

This is one of three grants from NASA that Solomey is currently working on, one of which includes a $2 million grant for a neutrino detector for the sun , which used similar technology and served as a jumping off point for the latest research.

About Wichita State University

Wichita State University is Kansas' only urban public research university, enrolling more than 23,000 students between its main campus and WSU Tech, including students from every state in the U.S. and more than 100 countries. Wichita State and WSU Tech are recognized for being student centered and innovation driven.

Located in the largest city in the state with one of the highest concentrations in the United States of jobs involving science, technology, engineering and math (STEM), Wichita State University provides uniquely distinctive and innovative pathways of applied learning, applied research and career opportunities for all of our students.

The Innovation Campus , which is a physical extension of the Wichita State University main campus, is one of the nation’s largest and fastest-growing research/innovation parks, encompassing over 120 acres and is home to a number of global companies and organizations.

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Topic no. 421, Scholarships, fellowship grants, and other grants
A fellowship grant is generally an amount paid or allowed to an individual for the purpose of study or research. Other types of grants include need-based grants (such as Pell Grants) and Fulbright grants. Tax-free. If you receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free.
Are Scholarships And Grants Taxable?
The good news is that your scholarship and grant are not taxable if the money was for study or research for a degree-seeking student who spent the funds to pay qualified expenses at an eligible educational organization. ... Scholarship or grant income is taxable in the following situations.: Amounts received for incidental expenses such as room ...
Do You Have to Pay Taxes on Grant Money?
In addition to federal tax laws, state tax laws may also impact the taxability of grant funds. Research the specific tax laws in your state's Department of Revenue website to see if there are any additional considerations. Consult with a tax professional. If you're still unsure about the tax implications of the grant, it's advisable to ...
Depending on how your research funds are ...
Generally, research grants is non-taxable (ie - excludable from gross income) if they meet one of the following conditions: a. The grant qualifies as a prize or award that is excludible from gross income under Internal Revenue Code section 74 (b). In non-legalese, what this means is that the individual could not have made an action to enter the ...
Tax Guidelines for Scholarships, Fellowships, and Grants
A fellowship grant is generally an amount paid or allowed to an individual for the purpose of study or research. Other types of grants include need-based grants (such as Pell Grants) and Fulbright grants. Not Taxable. If you receive a scholarship, a fellowship grant, or other grant, all or part of the amounts you receive may be tax-free.
Are College Scholarships and Grants Taxable?
In most cases, the scholarship or grant provider will send you a W-2 form showing what amount of the award is taxable. Enter the taxable amount from your W-2 form on the line for wages, salaries ...
PDF Tax Reporting of Fellowship Income
Fellowship payments are taxable, unless they are excluded from taxable income under Section 117(a) of the Internal Revenue Code. Fellowship amounts are nontaxable where: • The recipient is an individual, who is a candidate for a degree at an educational organization such as Harvard University (i.e., undergraduates or graduate students, but ...
Understanding the Tax Implications of Grants and Fellowships
It does not represent payment for teaching, research or other services required as a condition for receiving the scholarship. ... If your grant or fellowship is tax-free and you did not have any other income to report, then you would not have to file a tax return. On the other hand, if a portion of the grant or fellowship can be deemed taxable ...
Are my scholarships, fellowships, or grants taxable?
Congratulations on getting an award! Scholarships, fellowships, and Pell grants received by registered students who are working toward a degree at a college, university, or other accredited educational institution are generally nontaxable as long as the money is used entirely for qualified education expenses.
Are Business Grants Taxable?
The majority of business grants, including government grants, count as taxable income. This means that you'll have to pay taxes on the money you receive from the grant, effectively reducing the ...
Are Research Grants Taxable? You Need to Know as Researcher
Research grant to cover expenses: A researcher receives a grant to cover the cost of travel and lodging for a conference related to their research project. This grant would typically be non-taxable, as it is intended to reimburse the researcher for expenses incurred during the research project. Research grant to compensate for time and effort ...
Can Nonprofit Grants Be Taxed?
There are many types of grants that are awarded for many different reasons. There are for-profit opportunities, nonprofit opportunities, grants to tribal organizations, grants to research institutions—the list goes on. The type of grant and the type of organization that is receiving the grant impact the guidance for the tax implications.
Reporting Your Taxes
Reporting Your Taxes. Each year, in mid-April, residents and citizens of the United States are required to submit their annual income tax returns for the calendar year prior. As resident aliens of the United States, Fulbrighters are also required to participate in this annual ritual. We ask that Fulbrighters approach this piece of their ...
Are Business Grants Taxable?
In that case, you do not have to include those funds as taxable income. [1] . Typically, however, the money you receive from a small-business grant (regardless of the source) is taxed as income on ...
Solved: I applied and received an undergraduate research award ...
Non-Taxable Fellowship - A fellowship payment received by a candidate for a degree, also called a "scholarship" payment by the IRS, is not taxable income to the student if it is used only for tuition and required fees and/or course related expenses, such as fees, books, supplies and equipment that are required of all students enrolled in ...
Solved: I received a grant and have a 1099-MISC for it. Do I also
Academic institutions, research facilities, and certain government agencies will often report grant, fellowship, and scholarship income in various or nonstandard ways, especially at the graduate and postdoctoral levels. It's certainly not an uncommon occurrence; but yes, the grant you received is definitely considered taxable compensation.
11.3.10 Stipend Supplementation, Compensation, and Other Income
Compensation may not be paid from a research grant that supports the same research that is part of the trainee's planned training experience as approved in the Kirschstein-NRSA institutional research training grant application. ... Section 117 of the Internal Revenue Code (26 U.S.C. 117) applies to the tax treatment of scholarships and ...
Taxes for Grads: Do Scholarships Count as Taxable Income?
The $1,500 typically counts toward your taxable income for the year. The remaining $3,500 is usually not taxable, as long as you're a degree student at a qualifying institution and the money is used for qualified education expenses. If you receive a scholarship with the condition that you provide services in the future, you'll typically need ...
Are Business Grants Taxable?
The grant process from research through application can be quite time-consuming. First, you have to find grants that are a good fit for your business. ... If you're unsure of whether a grant is taxable, do your research. Read all terms and conditions, contact the grantmaker, or check out what the IRS has to say about taxable income. You can ...
"Is my National Research Service Award individual fellowship stipend
That said, it's a question best discussed with your institution and your tax preparer. Read Section 11.2.10.6 Taxability of Stipends of the NIH Grants Policy Statement for additional context. Learn how fellowship funds may be spent at What Do Training Funds Pay For?
Use of Research Funds
Georgetown University research funds are intended to support a broad range of research activities, according to the guidelines outlined below. Definitions. For the purposes of this policy, the term "research funds" refers to: (i) any grant funds received from an external sponsor to support budgeted research activities, and
Sample Grant Applications Serve as Exemplary Guides
NIH's grant application process can be onerous, and it helps to have access to successful sample applications. NIAID shares sample applications—posted with permission from grant recipients—to provide examples of good grantsmanship and successful approaches to presenting a Research Strategy and Specific Aims.
Line 13010
Certain scholarship, fellowship and bursaries are not taxable, such as: elementary and secondary school scholarship and bursaries. post-secondary school scholarship, fellowship, and bursaries received in 2023 if you are considered a full-time qualifying student for 2022, 2023, or 2024. If you received an artists' project grant, you may be able ...
Plan Your Research Career at NIH
Explore the NIH Funding Programs by Career Stage page to get to know the different programs by career stage, learn useful tips, and better understand the lingo of NIH funding. Once you identify a program of interest, you can find active funding opportunities with the "View Current Funding Opportunities" button on each program page.
After Grilling College Presidents, Congress Takes Aim At Their Funding
In the wake of widespread campus protests, Republicans are ready to challenge colleges' tax-exempt status, federal research funding, and even student financial aid.
2025 Tax Reform Options: Tax Cuts and Jobs Act Expirations
Lawmakers Will Have to Reform the Tax Code in 2025. The 2017 Tax Cuts and Jobs Act (TCJA) reduced average tax burdens for taxpayers across the income spectrum by temporarily changing the structure of the individual income tax, including lower rates, wider brackets, a larger standard deductionThe standard deduction reduces a taxpayer's taxable income by a set amount determined by the government.
Wichita State professor and student earn NASA grant to explore harmful
May 7, 2024 — As humanity begins to return to the moon and farther beyond, new technologies will need to be invented to assist in sustainable, long-term human-helmed missions. To help develop this technology, NASA has awarded a $133,342 grant to Wichita State University to research a more cost-effective detector for harmful radiation from space.
Musk's xAI Nears Funding at $18 Billion Value Soon As This Week
Elon Musk's artificial intelligence startup X.AI Corp. is set to close its funding round at a valuation of about $18 billion as soon as this week, according to people familiar with the matter.

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