Nea Grant

[Edd Smith]

Client received a $20,000 NEA grant. The Grant Project states:
"To support activities that contribute to your creative development and artistic growth and may include writing, research, and travel, as described in your application"

The individual is a teacher.

I think it should go on line 21 as other income.

Any other ideas?

TIA
Ed

[Koss]

Grant

How did the NEA report it?

Generally, scholarships and grants go on line 7. But the outcome would be the same.

Depending on how the money is actually being used, and how it was reported, there might be other options.

If your client is simply using the money to live on, in order to free up time from teaching or other work so that he can finish the novel he's been working on for the last three years...

This could be totally legitimate. Some grants are actually meant to be a stipend for living expenses, to allow the creative juices to flow.

If this is how most of the money is used, then I agree that most or all of it is fully taxable, but not subject to SE tax. Line 7 or Line 1 would accomplish this.

But in other cases, the grant money is used for expenses that are directly associated with the research, writing, or artwork. I'm not necessarily talking about travel expenses. That can get real gray real fast, like someone traveling through the south of France while supposedly writing a book on wine or something.

I'm talking about more concrete, legitimate expenses, such as...

A sculptor who needs $7500 worth of brass and aluminum for a project that was part of the grant proposal.

Some of the money may not be taxable if this is how it is being used. Or it could somehow be expensed. The extreme example would be a biochemist who gets a grant of $750,000, where a large chunk of the money is used to pay research assistants and lab technicians. Okay, that type of grant usually goes through the university itself, which would handle the payroll. But what if such a grant was actually paid to an individual, maybe on a smaller scale, say $100,000, and the guy hired an assistant for $25,000 per year to work on the project with him?

At some point it becomes a business activity, and it might actually go on a Schedule C, which would make sense because this would also be the proper place to report the wages paid to the assistant.

Burton