The first thing you want to do is fine tune the photo for best results. You want a nice, sharp, detailed brush, so zoom in to 100% and check that the picture is in good condition. Try sharpening the photo slightly (Filters > Enhance > Unsharp Mask…). Set Radius to anywhere from 55-75 and Amount to somewhere between .60 and 1.00. You could also just use the Sharpen filter (Filters > Enhance > Sharpen…) with Sharpness set to about 50.
The most important part of the method for making a grunge brush is capturing as much detail and as possible so the brush will have a nice texture and shape. If your picture already has a high contrast, you can skip this part. But if the picture doesn’t have such a high contrast and looks kind of dull, adjust the contrast (Colors > Brightness-Contrast…). Play with the Contrast level until you get something a bit more vibrant. Make sure you don’t get your picture too sharp.
You should have something like this:
Create a new layer, fill it with white with the Bucket Tool, and move it below the Background layer. Now you want to notch up the brightness so that while the detail remains visible, the rest of the brush is white or very bright. If your image already fairly bright, just use the Brightness-Contrast filter again and adjust the brightness until the picture becomes pale. If your picture is dark to begin with, try inverting the colors (Colors > Invert) and adjusting the brightness from there if you still need it.
Make sure the image is bright enough, then go to Layer > Transparency > Color to Alpha… and set the color to white (ffffff). If the grunge detail in the picture is hard to see, you can now easily make it darker by duplicating the layer and merging them together.
Zoom out to 50% or 67%, depending on how big your image is right now. Next you need to cut out the edges of the brush. Using another textured brush set (grunge, clouds, etc), carefully erase the edges of the image as shown in the screenshot. You want to make the edges completely transparent, but you don’t want to erase the parts of the image that you want in the brush.
Just to make sure, go along the border of the image with a large, solid brush. A good brush to use would be Circle (19). Or for even better results, create a new circular brush and make it big. So as not to make the edges of the brush too sharp, you can make a fuzzy brush and lightly erase around the edges.
We’re almost done! Time for a final tune-up session. With those same textured brushes you used earlier, select the eraser tool and adjust the opacity to about 50. Lightly erase the parts of the brush that are too dark, too sharp, or whatever. Try double-clicking to really get at the exceptionally dark spots.
If you’re done but you think the image was erased a bit too much, you can just duplicate the brush layer, adjust the opacity, and merge the two brush layers together. Merge the two remaining layers (the brush layer and the white layer), then autocrop the image (Image > Autocrop Image). If you want to be able to use your brush with different colors, you need to set the mode to Grayscale (Image > Mode > Grayscale). If you leave the brush as is, the brush will stay black regardless of what color you choose to brush in. Save your new, awesome grunge brush as thenameofthebrush.gbr. Move it to your brushes folder and refresh your Brushes dialog. Finished!