Yes! Whether you get cash or equipment (toys, supplies, furniture, etc.) from a grant, you must report this as taxable income.
When you spend the cash on something for your business you can deduct the business portion as a business expense. If it’s used by your family and your business, deduct your Time-Space % of the cost.
When you receive equipment from a grant, deduct the business portion of the value of the equipment as a business expense.
If you spend the cash or use the equipment 100% for your business, there will be no tax consequence to you. For example, if you got a $1,000 outdoor play equipment and you used it 100% for your business, you would report $1,000 as income and $1,000 as a business expense.