Teachers are setting up their classrooms for the new school year, and it’s common for them 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).
Prior to 2018
Employee expenses are potentially deductible if they 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.
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 under the educator expense deduction.
The above-the-line educator expense deduction and what it means for teachers
Back in 2002, Congress created the above-the-line educator expense deduction. This is because 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, which means fewer taxpayers will benefit from itemizing.
Qualifying elementary and secondary school teachers and other eligible educators can deduct up to $250 of qualified expenses. Principals and councilors also qualify for the deduction. If you’re married filing jointly and both you and your spouse are educators, you can deduct up to $500 of unreimbursed expenses. You cannot deduct more than $250 each.
Qualified expenses include amounts paid or incurred during the tax year for books, supplies, computer equipment (including related software and services), other equipment and supplementary materials that you use in the classroom. For courses in health and physical education, the costs of supplies are qualified expenses only if related to athletics.
The IRS has a tax topic article over the above-the-line deduction. For more information on the deduction, visit: https://www.irs.gov/taxtopics/tc458.
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.
More from GLR
Many teachers have the summer off, and spend it volunteering. Learn how you can deduct certain volunteering expenses here: http://glrcpa.com/what-you-can-deduct-when-volunteering/.