It’s common for teachers to pay for a portion of their classroom supplies out of pocket. A special tax break allows these educators to deduct some of their expenses. This educator expense deduction is especially important now due to some changes under the Tax Cuts and Jobs Act (TCJA).
The Old Miscellaneous Itemized Deduction
Before 2018, employees could potentially deduct their expenses. This is if the expenses were unreimbursed by the employer and ordinary and necessary to the “business” of being an employee. A teacher’s out-of-pocket classroom expenses could qualify.
But employees had to claim these expenses as a miscellaneous itemized deduction. They were also subject to a 2% of adjusted gross income (AGI) floor. This meant employees, including teachers, could enjoy a tax benefit only if they itemized deductions (rather than taking the standard deduction). In addition, all their deductions subject to the floor, combined, had to exceed 2% of their AGI.
Now, for 2018 through 2025, the TCJA has suspended miscellaneous itemized deductions subject to the 2% of AGI floor. Fortunately, qualifying educators can still deduct some of their unreimbursed out-of-pocket classroom costs. This is under the educator expense deduction.
The Above-the-Line Educator Expense Deduction
Back in 2002, Congress created the above-the-line educator expense deduction. For many teachers, the 2% of AGI threshold for the miscellaneous itemized deduction was difficult to meet. An above-the-line deduction is one that’s subtracted from your gross income to determine your AGI.
You don’t have to itemize to claim an above-the-line deduction. This is especially significant with the TCJA’s near doubling of the standard deduction. This means fewer taxpayers will benefit from itemizing.
Qualifying elementary and secondary school teachers can deduct up to $250 of qualified expenses. Other eligible educators, such as counselors and principals, can use the deduction, too. If you’re married filing jointly and both you and your spouse are educators, you can deduct up to $500 of unreimbursed expenses. But the limit is not more than $250 each.
Qualified expenses include amounts paid or incurred during the tax year for equipment and materials you use in the classroom. These include books, supplies, computer equipment (including related software and services), other equipment and supplementary materials. For courses in health and physical education, the costs of supplies must be related to athletics.
Many Rules, Many Changes
Some additional rules apply to the educator expense deduction. Contact us for more details or to discuss other tax deductions that may be available to you this year. The TCJA has made significant changes to many deductions for individuals.