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Greg O’Brien, CPA, CTS
August 17, 2023

Business Grants 101: Insights from #1 Tax Strategist in the US

As a business owner, you're constantly seeking ways to grow your business and secure the financial support you need. One avenue worth exploring is business grants. These grants provide non-repayable funds that can give your business a much-needed boost without the burden of repayment. In this article, we'll dive into the world of business grants, exploring what they are, whether they are taxable, and how you can obtain them to optimize your tax and wealth strategies. Crowned as #1 tax strategists in the US by The American Institute of Certified Tax Planners , we are dedicated to providing you with the tools and insights needed to make informed decisions and maximize your financial potential.

Understanding Business Grants

A business grant is a form of financial assistance provided to individuals, businesses, nonprofits, or corporations by various entities, including federal, state, and local governments, as well as private businesses or corporations. Unlike loans, grants do not need to be repaid, making them an attractive option for businesses looking for capital infusion.

These grants come in various forms, targeting specific businesses based on factors such as minority ownership, nonprofit status, veteran-owned status, or women entrepreneurship. For example, grants for minority-owned businesses can provide a much-needed boost to promote growth and profitability.

Navigating Tax Implications of Business Grants with A Tax Strategist 

One important consideration when it comes to business grants is their tax implications. While grants are generally considered taxable income, certain types of grants may be exempt from taxation, depending on their purpose and circumstances.

To determine the taxability of your grant, it's crucial to review your business grant agreement, as it will outline any tax obligations you may have. If the agreement doesn't explicitly state your tax obligations, you can contact the funding organization for clarification. Additionally, researching federal guidelines, reviewing your state's laws, and consulting with a tax strategist can provide further insights into your specific tax obligations.

Planning for Tax Obligations

Once you have confirmed the taxability of your business grant, it's essential to plan for your tax obligations to ensure compliance and avoid any unexpected tax liabilities. Here are some tips to help you handle your tax obligations effectively:

  • Reserve a portion of the grant money for taxes: To avoid scrambling for funds later, set aside a portion of the grant money to cover your tax obligations. By doing so, you can ensure that you have the necessary funds available when it's time to file your taxes.
  • Include grants in estimated tax payments: When making estimated tax payments, be sure to include your grant income to avoid underpayment penalties. By accurately accounting for your grant income, you can stay compliant with tax regulations and prevent any potential penalties.
  • Maintain detailed financial records: Keeping accurate and organized financial records is crucial for managing your business finances effectively. By maintaining good financial records, you can easily track your grant income, expenses, and tax obligations, minimizing the risk of errors and ensuring a smooth tax filing process.
  • Explore deductions for tax-free wealth: While a taxable business grant increases your taxable income, you can explore various tax deductions to lower your overall tax liability. Deductions such as business expenses, depreciation, or tax credits can help offset the tax burden resulting from your grant income.

Finding Business Grants

Finding the right business grants for your unique needs requires thorough research and exploration of various resources. Here are some avenues you can explore to discover potential grant opportunities:

  • Government agencies: Government websites such as or the Small Business Administration (SBA) website provide comprehensive information on federal, state, and local business grants.
  • Private corporations: Many private corporations offer grants to support small businesses. Research corporate grant programs to see if any align with your business's industry or funding priorities.
  • Nonprofit organizations: Nonprofits often provide grants to support businesses in specific industries or underserved communities. Explore nonprofit organizations and their grant programs to find potential opportunities.

Utilizing platforms like OpenGrants can also provide a comprehensive database of public and private grant funding in the United States, helping you find relevant grants based on your unique business needs.

Alternative Funding Options

While business grants can provide valuable financial support, they may involve longer application processes and stricter eligibility criteria. Additionally, grants can be highly competitive due to their non-repayable nature. As alternatives to grants, consider the following funding options:

  • Bank business loans: Business loans from banks provide capital that needs to be repaid with interest. Although loans require repayment, they can help you build business credit, providing long-term financial support for your business.
  • SBA loans: Small Business Administration (SBA) loans offer lower interest rates, longer repayment terms, and access to more significant loan amounts. While they require repayment, SBA loans can be a more affordable financing option for small businesses. 
  • Business credit cards: Business credit cards provide flexibility and immediate access to funds up to a certain limit. They can be used for day-to-day expenses and may offer rewards or cashback benefits. Check out our blog on business credit here!
  • Crowdfunding: Crowdfunding platforms like Kickstarter or Indiegogo allow you to raise funds by presenting your project or idea to a broader audience. However, keep in mind that funds raised through crowdfunding may still be taxable.

Conclusion: Tax-Free Wealth & Business Grants

Leveraging non-repayable funds, you can infuse capital into your business without incurring debt. Proper tax planning and compliance ensure that you maximize the benefits of grants while minimizing any tax liabilities. By exploring various grant opportunities and alternative funding options, you can unlock tax-free wealth and propel your business towards success.

Remember to consult with a tax strategist or CPA near you to ensure that you fully understand the tax implications of business grants and develop a customized tax optimization strategy for your business. With proper guidance and planning, you can navigate the complexities of grants and taxes to achieve financial success and growth for your business. Contact us today to learn more!

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