The state of Tennessee acknowledges that small companies are the foundation of the American economy. To aid small businesses in expanding and succeeding, the state provides a variety of grants, loans, and other financial assistance programs. Many business owners do, however, ponder if these grants are taxable. Yes, in a nutshell, but there are some crucial details to be aware of.
Federal income taxes are owed on all grants and other financial aid since they are regarded as compensation. This covers both grants from the state of Tennessee, such as the Rural Business Development Grant (RBDG) and the FastTrack Economic Development Fund, as well as grants from the federal government, such as the Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP).
There are a few intricacies and exceptions, though, to be aware of. A $10,000 grant from the SBA, for instance, is not counted as taxable income. This program is meant to offer immediate assistance to small businesses that are experiencing difficulties as a result of the COVID-19 outbreak. The donation is not subject to repayment and is not subject to inclusion as income on the tax return of the firm.
Additionally, certain grants might be governed by particular tax laws. For instance, the Tennessee Small and Minority-Owned Business Assistance Program awards funds to firms run by women, people of color, and former service members. Although these donations might be exempt from state income taxes, they are nevertheless subject to federal tax laws. To find out the precise tax repercussions of any gifts they get, business owners should speak with a tax expert.
It’s also crucial to remember that grants can still offer small businesses substantial financial advantages even if they could be taxable. Grants can offer much-needed capital to support business expansion, the hiring of additional personnel, and the purchase of new machinery and technology. If a small business is thinking about applying for a grant, they should carefully explore their alternatives and speak with a professional advisor to be sure they are maximizing the financing potential.
Finally, it should be noted that while Tennessee business awards are typically regarded as taxable income, there are a few exceptions and subtle differences to be aware of. To find out the precise tax repercussions of any gifts they get, business owners should speak with a tax expert. Grants can be a valuable financial resource for small firms and a key instrument for growth and expansion, notwithstanding any potential tax repercussions.
An associate degree or technical certificate at a Tennessee community college or college of applied technology is free of charge tuition and other required fees for qualified adult learners who qualify for the state-funded TN Reconnect Grant. The grant has no tax implications and doesn’t need to be paid back.
The Tennessee Promise program is a mentorship and scholarship initiative that offers qualifying high school graduates attending a Tennessee community or technical college tuition-free education.