Teacher Tax Credits
Education professionals routinely dip into their own pockets to purchase supplies for cash-strapped schools. In 2011, the IRS reinstated a tax credit for teachers that had been scheduled to expire each year since 2003. The credit allows teachers to take an above-the-line tax deduction of $250 for out-of-pocket expenses for classroom supplies. Married couples who are both educators may each claim up to $250 in expenses.
The types of supplies that are eligible for the tax credit include books, supplies, computer equipment, computer software, online services and other classroom materials. The rule of the thumb that the IRS applies is whether an item is “ordinary and necessary,” meaning that it’s a common, appropriate and acceptable expense in the teaching profession. Expenses that have been reimbursed by a school or school district don’t qualify for the credit. Also, expenses for supplies for health and physical education classes can only be included if they are related to athletics.
To simplify the tax benefit for teachers, the IRS allows the deduction to be claimed directly on Form 1040. This makes the benefit available even for teachers who don’t use a Schedule A to itemize educator expenses tax deductions. The credit isn’t limited to teachers, but can also be claimed by several types of employees of public and private schools, including instructors, aides, counselors and principals. To qualify for the credit, an educator must work with K through 12 students for at least 900 hours during the academic year. Individuals who provide home schooling instruction do not qualify for the deduction.
Teacher tax credits are technically different from teacher tax deductions because they are applied as an income adjustment. This lowers taxes owed because adjusted gross income (AGI) is lowered. At this point, it’s unknown whether the IRS will extend the educator expense tax credit for 2013 or if other types of teacher tax breaks will be enacted. In anticipation of the credit being renewed, educators should save receipts for job-related expenses.
If the teacher tax credit disappears in 2013, teachers will still have the option of claiming classroom expense as miscellaneous itemized deductions on Schedule A. Not all teachers will have enough total deductions to qualify for itemization, but those who are already deducting expenses related to mortgage interest and property taxes can also deduct for qualified educator expenses.
For more information on the teacher tax credit, visit the website of the Internal Revenue Service.