If you received a government grant and were issued Form 1099-G, part or all of that grant may be taxable. Understanding where to report it on your tax return can help you avoid filing errors and ensure your income is reported correctly.
What Are Taxable Grants on Form 1099-G?
Form 1099-G reports certain payments made by federal, state, local, or tribal governments. When taxable grants of $600 or more are paid during the year, they're generally reported in Box 6 of Form 1099-G.
Examples of taxable grants may include:
- Grants for subsidized energy financing programs
- Grants for projects that produce or conserve energy
- Grants approved by an Indian tribal government
- Other government grants that are taxable under federal tax rules
In most cases, taxable grants are reported as Other Income on Form 1040. However, if the grant is connected to a business, rental activity, farm operation, or certain crop-sharing arrangements, it should be reported on the appropriate tax form instead.
Where Do I Enter a Taxable Grant From Form 1099-G?
If your taxable grant is not related to a Schedule C business, Schedule E rental activity, Schedule F farming activity, or Form 4835, enter it as Other Income by following these steps:
- Select Federal from the left navigation menu.
- Select Income.
- Choose Select Your Forms, then continue.
- Scroll to Less Common Income.
- Select Other Income.
- From the Other Income Description dropdown menu, choose Taxable Grants.
Your taxable grant amount will then flow to the appropriate area of your federal tax return.
What If My Grant Is Related to a Business, Rental Property, or Farm?
If the grant is connected to one of the following activities, do not enter it as Other Income:
- Schedule C: Self-employment or business income
- Schedule E: Rental real estate, royalties, partnerships, S corporations, estates, or trusts
- Schedule F: Farming income
- Form 4835: Farm rental income and expenses
Instead, include the grant as income on the corresponding form or schedule for that activity.
Why Does It Matter?
The way you report a taxable grant depends on why you received it. Grants tied to a business or income-producing activity are generally reported with the income from that activity. Personal taxable grants that aren't connected to a business, rental, or farm operation are usually reported as Other Income.
Reporting the grant in the correct place helps ensure your return is accurate and reduces the chance of IRS questions later.