This guide was compiled for early childhood educators and business owners to provide additional information regarding the taxable status of state and federal COVID-19 relief funds. This is not a comprehensive guide and we recommend you work directly with your tax professional regarding your particular tax situation.
Do I need to report funds received from the Nebraska Department of Economic Development under the Small Business Stabilization Grant program as taxable income?
Yes. The federal tax code generally includes grants received from government programs in gross income. Nebraska follows the federal tax code. Grants received from Nebraska’s stabilization programs are included in gross income under the federal tax code and are therefore subject to Nebraska income tax.
Nebraska established the COVID-19 stabilization grant programs from federal funding received from the Coronavirus Relief Fund under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Nebraska’s stabilization grant programs include the Small Business Stabilization Program and the Livestock Producer Stabilization Program.
I received CARES Act funding that was administered by the Nebraska Children and Families Foundation either through the “Stabilization of Child Care Program” or the “Incentive to Reopen Child Care Program.”
I received CARES Act funding that was applied for and administered by the Nebraska Department of Health and Human Services.
If you received a CARES grant in 2020 as an eligible child care provider, be aware this is considered taxable income and must be reported on your 2020 income tax report.
CARES grants for child care providers were administered and distributed in three main ways – and you may receive a 1099 form for each of these, depending on the total amount of funding you received:
Online application process through DHHS and Amplifund in July, with payments in September (form 1099-G)
Automatic payments to subsidy providers only in December (form 1099-G)
Application process through Nebraska Children and Families Foundation administered throughout 2020 (form 1099-MISC)
I received a loan through the Paycheck Protection Program of the Small Business Administration. This loan was later forgiven (meaning that I do not need to pay the loan back). Is this taxable income?
No. Under the federal Consolidated Appropriations Act, 2021, forgiven PPP loans are excluded from the federal gross income of the recipient under the federal tax code. Nebraska follows the federal tax code. As a result, forgiven PPP loans are not included in taxable income for Nebraska purposes.
I received federal COVID-19 stimulus funding (Economic Impact Payment). Is that income taxed?
Individual taxpayers who received Economic Impact Payments (stimulus checks) should remember that stimulus payments they received are not considered taxable income and do not reduce the amount of their tax refund.