If you’re an artist, there are few better feelings than winning a grant or prize – especially if there’s enough money attached to it to let you continue your work.
Unfortunately, receiving grants and/or bursaries also affects your income tax.
In most cases, grants and bursaries are considered taxable income.
If you are a self-employed artist, grants that are intended to help you produce “a literary, dramatic, musical or artistic work” (Canada Revenue Agency (CRA)) are included as part of your business income.
The case is much the same if you’re employed as an artist, whether you’ve been selected through a government program to become a writer-in-residence, had one of your works chosen for the Art Bank Purchase program or taken a position that exists because of a Canada Council grant.
Unless it’s a prescribed prize…
Prescribed prizes are not considered taxable income. However, winning any old prize won’t do; a prescribed prize is defined as “any prize that is recognized by the general public and that is awarded for meritorious achievement in the arts, the sciences or service to the public.”
So if you win an award such as the Governor General’s Literary Award or the Sobey Art Award, the amount of the prize won’t have to be included in your income. It doesn’t have to be a nationally known award, though; many community service awards would fit the criteria too.
Do you qualify for the scholarship exemption?
The scholarship exemption lets you exclude the first $500 of total scholarships, fellowships, bursaries and prizes that have been included in computing your income in a given tax year.
If you’re a part-time student, you can still claim the scholarship exemption; you just can’t claim all of it. The Canada Revenue Agency’s Scholarship exemption – Part-time enrolment worksheet will show you how much you can claim in this case.
If you received an artist’s project grant (a scholarship, fellowship, bursary or prize used in producing a literary, dramatic, musical, or artistic work) you may claim more than $500 under the scholarship exemption – “an exemption in excess of $500 where a scholarship, fellowship or bursary is received in connection with a taxpayer’s enrolment in certain educational programs or is used by a taxpayer in the production of a literary, dramatic, musical or artistic work” (CRA).
To apply this deduction, commonly known as the art production grant exemption, you have to have used the amount of the grant to compute your income. You can read more details about this and about the rules governing Scholarships, Research Grants and Other Education Assistance in the CRA’s Income Tax Folio S1-F2-C3.
The good news…
Whether you were a self-employed artist or an employed artist in the previous tax year, you can deduct appropriate expenses.
Self-employed artists can deduct the usual business expenses while employed artists can deduct the expenses they paid out to earn employment from an artistic activity in a particular tax year if they:
- composed a dramatic, musical, or literary work;
- performed as an actor, dancer, singer, or musician in a dramatic or musical work;
- performed an artistic activity as a member of a professional artists’ association that the Minister of Canadian Heritage has certified; or
- created a painting, print, etching, drawing, sculpture, or similar work of art. For income tax purposes, it is not an artistic activity when you reproduce these items.
How much can you claim?
The amount you can claim is limited to the lesser of 20% of your employment income from artistic activities or $1,000 but if you have expenses that you can’t claim because of this, you can carry them forward and deduct them from artistic income you earn in a future year.