Income Taxes and Your Grant

Receiving a grant from the Canada Council for the Arts has different tax implications for everyone. The Council cannot provide advice on the income tax implications of your grant. The Council recommends that you consult with a fiscal advisor to determine how the grant you receive will impact your personal and/or business income taxes. It is important to note that the payment terms of a grant may have an impact on the calculation of the taxes payable.

Payee name versus Responsible party

When you receive a grant, you have to fill out the Grant Acceptance Form (GAF) that allows the grant recipient to select a payee for the grant as well as select to which bank account the grant payment must be issued. Although you may request to have the grant deposited in a bank account other than that of the grant recipient, the T4A at the end of the year will be made out in the name of the grant recipient for payments issued during the calendar year. The grant recipient – not the payee name on the cheque – is the party responsible for any tax filings based on funds received.

T4A – Box 105

Scholarships, bursaries, fellowships, artists’ project grants, and prizes

In accordance with Canada Revenue Agency (CRA) guidance, the Canada Council for the Arts enters all grants in box 105 of the T4A slips. Box 105 is described as follows on the T4A: “Scholarships, bursaries, fellowships, artists’ project grants, and prizes”.

Enter on line 13010:

Individuals who are not self-employed who received an art production grant should enter the amount per the T4A less eligible expenses on line 13010 of their tax return, if the amount received is neither business nor employment income. Please refer to Income Tax Folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance, and Income Tax Folio S4-F14-C1, Artists and Writers for more information (links below).

Enter on line 13499/14300:

An artist who is self-employed is generally considered to be operating a business, provided the activity is undertaken in pursuit of profit and there is objective evidence of business-like behaviour which supports that intention. If you are self-employed, report your income and eligible expenses on the appropriate lines for self-employment income (lines 13499 to 14300). Please refer to Income Tax Folio S4-F14-C1 for more information on self-employed income (link below).

Expected expenses versus Grant payment

You may request that Council issue multiple payments for your grant instead of receiving one big lump sum. It is important to understand why. A T4A is prepared yearly for payments issued during the prior calendar year. It will be easier for tax reporting purposes if you try to match your grant income and eligible expenses in a given year.

Income Tax Folio S4-F14-C1 provides examples of expenses that are deductible by an artist or writer. Example 7 illustrates how to calculate income from an art production grant that is neither business nor employment income, taking into account the applicable exemptions.

Paragraphs 3.98 to 3.101 of Income Tax Folio S1-F2-C3 also explain how to calculate the amount of an art production grant to be included in income when it is neither business nor employment income. 

Important note:

Grant recipients are encouraged to keep track of how much grant money is being spent.

If it looks like your expected expenses for the calendar year will be less than the grant money you were paid that year, simply return the surplus to the Canada Council ⎯ preferably before the end of November so it is received in time to be processed that year. 

Under Canada Revenue Agency requirements, if you return unspent grant funds outside the year a grant payment was issued to you, the return will no longer qualify for a T4A amendment. Repaying your unspent funds received in one year before the end of that same year can help minimize your tax impacts.

Links

Income Tax Folio S4-F14-C1, Artists and Writers

This income tax folio discusses the reporting of income by artists and writers from artistic and literary endeavours. It includes the criteria used by the Canada Revenue Agency (CRA) to distinguish artists and writers who are employees from those who are self-employed. This distinction is important in determining the expenses that are deductible in computing income.

An artist or writer may receive amounts that are neither business nor employment income, that may be required to be included in income. This Chapter also discusses the tax treatment of amounts received by an artist or writer that are to be used in the production of a literary, dramatic, musical, or artistic work (referred to in this Chapter as an art production grant).

Income Tax Folio S1-F2-C3: Scholarships, Research Grants and Other Education Assistance

This Chapter provides a general discussion of the taxation of scholarships, fellowships, bursaries, prizes, research grants, certain government financial assistance for education and training, forgivable loans and repayable awards. It examines the differences between the types of payments and benefits described above and explains how such amounts should be treated for income tax purposes. It provides the reader with an extensive review of the applicable legislation and is intended for readers who have a general understanding of the Act.

Liaison Officer service

The Canada Revenue Agency (CRA) offers a free Liaison Officer service to owners of small businesses and self-employed individuals to help them understand their business tax obligations. A visit from a Liaison Officer is 100% confidential.

Artists’ project grants

This is a Canada Revenue Agency (CRA) website page dedicated to give guidance and examples specific to completing an individual artist’s project grant Line 13010 in their Income Tax and Benefit Return.

Other links and tools on the Canada Revenue Agency website

Tax Tips from the CRA

Questions and answers about filing your taxes

Small businesses and self-employed income

You can also find more information on “Tax Tips for Artists” on the CARFAC website.