Thanks for using JustAnswers.com! I will do my best to answer your tax questions clearly and concisely, based on the information that you have provided.The funding that you have received is hobby income. You will claim the income as other income on line 21 of your income tax return. You can deduct expenses related to the hobby as a miscellaneous itemized deduction on schedule A up to the amount of your hobby income. For example, your funding was 10,000 dollars and you have 12,000 dollars in project related expenses. The full 10K is taxable other income, and you can deduct 10,000 dollars as an itemized deduction. The 2K left over is non-deductible.If there are additional questions or concerns, please reply to this answer so that I may assist you further. If this answers your question, please rate my performance between OK and Excellent so that I may receive credit for my work. Thanks for your business.