The fall semester is in full swing. As teachers are getting to know a new group of students, they undoubtedly have a lot on their minds other than taxes. Still, remembering what to keep records of at this point can help lower their tax burden. There are three important work-related tax benefits that might help educators lessen their tax bill.
There are tax deductions for teachers who have qualified expenses related to their profession. The cost of paying for things like classroom supplies, training, and travel might be deductible.
The way to take advantage of these tax breaks depends on how you do your taxes: Claiming the Educator Expense Deduction (up to $250) or, for those who itemize their deductions, claiming eligible work-related expenses as a miscellaneous deduction on Schedule A.
A third key benefit enables many teachers and other educators to take advantage of various education tax benefits for their continuing educational pursuits, especially the Lifetime Learning Credit or, in some cases depending on your circumstances, the American Opportunity Tax Credit.
Educator Expense Deduction
Educators can deduct up to $250 ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 each) of unreimbursed business expenses. The educator expense deduction, claimed on either Form 1040 Line 23 or Form 1040A Line 16, is available even if an educator doesn’t itemize their deductions. To do so, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide for at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.
Those who qualify can deduct costs like books, supplies, computer equipment and software, classroom equipment and supplementary materials used in the classroom. Expenses for participation in professional development courses are also deductible. Athletic supplies qualify if used for courses in health or physical education.
Itemizing Deductions (Using Schedule A)
Often educators have qualifying classroom and professional development expenses that exceed the $250 limit. In that case, they can claim these excess expenses as a miscellaneous deduction on Schedule A (Form 1040 or Form 1040NR). In addition, educators can claim other work-related expenses, such as the cost of subscriptions to professional journals, professional licenses, and union dues. Transportation expenses may also be deductible in situations such as, for example, where an educator assigned to teach at two different schools needs to drive from one school to the other on the same day. Miscellaneous deductions of this kind are subject to a two-percent limit. This means that a taxpayer must subtract two percent of their adjusted gross income from the total qualifying miscellaneous deduction amount.
Educators should keep detailed records of qualifying expenses, noting the date, amount, and purpose of each purchase. This will help prevent a missed deduction at tax time.
Taxpayers should also keep a copy of their tax return for at least three years. Copies of tax returns may be needed for many reasons. If applying for college financial aid, a tax transcript may be all that is needed. A tax transcript summarizes return information and includes adjusted gross income.