For creatives in Canada, grants can be a key part of continuing to produce your art and jumpstart or maintain your career. Here’s how to declare the income from artist project grants on your income taxes, and how they are treated when it comes to GST/HST.
An artists’ project grant one that is intended to be used to produce a literary, dramatic, musical, or artistic work. Note that a ‘grant’ received in exchange for a completed work is not the same. In this situation we’re talking about an amount that is given to the artist before the work is created.
For example, Brenda is a songwriter and performer who receives a grant of $3,000 from FACTOR to produce her next album. She has registered for GST/HST and normally charges it on top of her fees when she performs.
The simplest option is to declare the grant income on Line 130 – Other Income. In this case she automatically has the option to deduct $500 (known as a scholarship exemption), or to deduct all allowable expenses related to the work. Deducting all expenses means doing more record-keeping and calculation, but often results in a bigger deduction (and lower taxes) overall.
More likely, however, Brenda is going to treat the grant as part of her business income on form T2125. She has the right to include the grant income here, because the grant provides support for that very business. In addition, she is already calculating deductions and expenses relating to her business as a songwriter and performer, so including those expenses associated with the production of the album would be fairly straightforward.
Another advantage of including the grant as part of her business income is that, if there’s a taxable amount of the grant left over (which will show up as income), the net income may subject to CPP premiums. Though it may seem like a disadvantage, maximizing your CPP premiums now means receiving higher CPP income when you retire and it’s worth it in the long run.
Artists’ Project Grants have no GST/HST impact
As for the GST/HST, however, artists’ project grants have no impact whatsoever. You don’t collect any GST/HST on a grant, so it adds nothing to what you need to remit. Remember: in the GST/HST system, you only remit what you collect, nothing more.
That may sound wrong, but it’s true. GST stands for Goods and Services Tax (and HST is just a different category of that tax). An artists’ project grant is not given in exchange for a good or a service. While Brenda is expected to use the grant to produce an album, it can’t be taken back if she doesn’t produce one. In other words, it’s not an exchange at all. The grantor doesn’t get a good or a service in return for the grant.
Because there is no exchange of goods and services, the Goods and Services Tax does not apply.
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