Are Research Grants Taxable?

Research grants are awards of financial assistance from a government agency, foundation, or other organization to an individual or organization to support a research project. The purpose of a research grant is to provide funding for the research project, which may include the costs of personnel, equipment, and supplies.

Research grants are not taxable income to the recipient. This is because research grants are considered to be gifts, and gifts are not taxable income. However, research grants may be subject to other taxes, such as sales tax or use tax.

Taxes on Research Grants

The following taxes may apply to research grants:

• Sales tax is a tax on the sale of goods and services. Sales tax is typically imposed by state and local governments. Research grants may be subject to sales tax if the grant is used to purchase goods or services that are subject to sales tax.
• Use tax is a tax on the use of goods or services. Use tax is typically imposed by state and local governments. Research grants may be subject to use tax if the grant is used to purchase goods or services that are subject to use tax.

Exemptions from Taxes on Research Grants

There are a number of exemptions from taxes on research grants. The following exemptions may apply to research grants:

• The research grant is used for educational purposes. Research grants that are used for educational purposes are exempt from sales tax and use tax.
• The research grant is used for charitable purposes. Research grants that are used for charitable purposes are exempt from sales tax and use tax.
• The research grant is used for scientific research purposes. Research grants that are used for scientific research purposes are exempt from sales tax and use tax.

How to Avoid Taxes on Research Grants

The following tips can help you avoid taxes on research grants:

• Use the research grant for educational purposes. If you use the research grant for educational purposes, the grant will be exempt from sales tax and use tax.
• Use the research grant for charitable purposes. If you use the research grant for charitable purposes, the grant will be exempt from sales tax and use tax.
• Use the research grant for scientific research purposes. If you use the research grant for scientific research purposes, the grant will be exempt from sales tax and use tax.
• Get a written exemption from the taxing authority. You can get a written exemption from the taxing authority by submitting a written request. The request should include the following information:
  • The name of the research grant
  • The amount of the research grant
  • The purpose of the research grant
  • The date the research grant was received
• Keep records of your research grant expenses. You should keep records of your research grant expenses in case you are audited by the taxing authority. The records should include the following information:
  • The date of the expense
  • The amount of the expense
  • The purpose of the expense

Conclusion

Research grants are a valuable source of funding for research projects. However, it is important to be aware of the tax implications of research grants. By following the tips in this article, you can avoid taxes on research grants and maximize the funding available for your research project.

Additional Information

The following resources provide additional information about taxes on research grants:

• Internal Revenue Service
• State and Local Tax Authorities
• National Association of State Budget Officers

Tables

Pros and Cons of Research Grants

Pros:

• Research grants can provide funding for research projects that would not otherwise be possible.
• Research grants can help researchers to advance their careers by providing them with the resources they need to conduct their research.
• Research grants can help to promote economic development by supporting research that leads to new products and services.

Cons:

• Research grants can be competitive, and it can be difficult to obtain funding.
• Research grants can come with restrictions that limit the research that can be conducted.
• Research grants can take a lot of time and effort to prepare and submit.