At back-to-school time, much of the focus is on the students returning to the classroom. It also involves their parents buying them school supplies, backpacks, clothes, etc., for the new school year. But let’s not forget about the teachers. It’s common for teachers to pay for some classroom supplies out of pocket, and the tax code provides a special break that makes it a little easier for these educators to deduct some of their expenses.
The Miscellaneous Itemized Deduction
Generally, you can deduct employee expenses if your employer doesn’t reimburse them. They also must be ordinary and necessary for your job. An expense is ordinary if it is common and accepted in your business. An expense is necessary if it is appropriate and helpful to your business.
You must claim these expenses as a miscellaneous itemized deduction. They are also subject to a 2% of adjusted gross income (AGI) floor. This means you’ll enjoy a tax benefit only if all your deductions subject to the floor, combined, exceed 2% of your AGI. For many taxpayers, including teachers, this can be a difficult threshold to meet.
The Educator Expense Deduction
Congress created the educator expense deduction to allow more teachers and other educators to receive a tax benefit from some of their unreimbursed out-of-pocket classroom expenses. The Protecting Americans from Tax Hikes (PATH) Act of 2015 made the break permanent. Since 2016, the deduction has been annually indexed for inflation (though because of low inflation it hasn’t increased yet) and has included professional development expenses.
Qualifying elementary and secondary school teachers and other eligible educators (such as counselors and principals) can deduct up to $250 of qualified expenses. (If you’re married filing jointly and both you and your spouse are educators, you can deduct up to $500 of unreimbursed expenses — but not more than $250 each.)
Qualified expenses include amounts paid or incurred during the tax year for your job. These expenses include those for books, supplies, computer equipment and software/services, and other equipment. They also include supplementary materials that you use in the classroom. For courses in health and physical education, the costs for supplies are qualified expenses only if related to athletics.
An Added Benefit
The educator expense deduction is an “above-the-line” deduction, which means you don’t have to itemize and it reduces your AGI. This has an added benefit. Because AGI-based limits affect a variety of tax breaks (such as the previously mentioned miscellaneous itemized deductions), lowering your AGI might help you maximize your tax breaks overall.
Contact us for more details about the educator expense deduction or tax breaks available for other work-related expenses.