Are Small-Business Grants Taxable?

We are committed to sharing unbiased reviews. Some of the links on our site are from our partners who compensate us. Read our editorial guidelines and advertising disclosure.

Business grants can be helpful in getting your business off the ground or making it through a hard financial period. However, small-business grants are taxable, which means you need to report any grants your business receives as income on your end-of-year taxes.

An accountant can give you advice specific to your business’s grants and tax situation. Along with checking in with your financial professional, review the information below to learn more about how to report grants as income.

Do you know how much it’ll cost to start your business?
Try our free startup costs worksheet to calculate expenses and estimate how much capital you need to launch.

By signing up I agree to the Terms of Use and Privacy Policy.

How to report your grant as income

Taxable grants must be  reported as part of your gross income. Generally, the grant provider will send you a W-2 form that will list what amount of the grand is taxable.

Generally speaking, you will list the taxable amount of your grant on the “Wages, salaries, tips” line on any of these  of these IRS forms: 

If you are filing as a sole proprietor, consider only filing a 1040 with a Schedule C attached. Definitely check out this review of how to file taxes a sole proprietorship and double check these options with a tax specialist or financial advisor.

Of course, not every small business is the same and neither are the different grant programs the same. For a more thorough explanation of each individual grant, check out the Small Business Association’s website for a list of grants available to different varieties of small businesses.

Another awesome resource is They offer resources on how to best find a grant that works for your needs and it also lays out all the new offerings the government is supplying due to the various national public health or natural disasters we are all dealing with

Difference between grants and loans

Some business owners may have a hard time distinguishing between grants and loans. A grant is a reward given to a qualifying organization or person to exact a goal. The SBA only gives grants to organizations or individuals who will use the money for a company that will stimulate the local economy or provide public services. If you are reading this and thinking, “Oh no, I don’t know if that is me!” Don’t worry. It is you. Any time you have created a business that will put money into your community qualifies as stimulating the economy.

You do not have to pay this money back. But unless you are using the money for education at a certified university, you will be taxed on it.

Loans are not gifts. You have to pay them back. It is money given on credit with the assumption that it will be repaid in full and sometimes with added interest depending on the terms of the loan. Loans are given based on need rather than merit. Loans differ in interest rates depending on a myriad of factors including who the lender is and your individual credit score. To understand how they work on a more granular level, read this piece about how small business loans work.

For more information on loans please take a look at these articles that lay out all the goods surrounding very specific loans:

Best Small Business Loans of 2022: Compare Financing

Best Small Business Payroll Loans 2022

8 Best Low-Interest Small-Business Loans 2022

10 Best Small Business Loans for Women 2022

Grow your business today

Browse hundreds of loan options, custom-tailored to your business and budget needs, from a single, simple platform.

The takeaway

If you review a grant for anything business-related, that grant money  is taxable.  The IRS will consider it part of your gross income, so plan on paying taxes for it.

Good luck, and congratulations on receiving a grant!

Want some ideas for finding the best funding for your business? Check out our favorite Best Small-Business Funding Options 2022

Related reading


At, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Nicolle Okoren
Written by
Nicolle Okoren
Nicolle Okoren focuses on finding solutions to the barriers that prevent entrepreneurs from thriving. A writer for more than 12 years, she has a BS in sociology and MA in journalism from Goldsmiths, University of London. Nicolle has bylines in The Guardian, Huffpost UK, Independent, CNN, Irish Independent, BridgeUniverse and Utah Business Magazine. Prior to jumping into journalism, she worked as a content writer for multiple startups.
Recent Articles
Best Fast and Easy Business Loans in 2020
Best Fast and Easy Business Loans in 2023
Get funding for your business today or tomorrow with these fast, simple business lenders. Best...
Lendio, Fundera, and Funding Circle offer some of the best small business loans
Best Small Business Loans
We researched more than 60 online and traditional lenders to come up with our list...
The 5 Best Startup Business Loans of 2023 reviews Lendio, Bluevine, and other top lenders for startups. Best overall Lendio Borrower requirements:...
Lendio, BlueVine, and Fundbox offer some of the best small business loans for women
10 Best Small-Business Loans for Women in 2023
Female business owners get rejected for loans at higher rates than their male counterparts.1 These...