If you are a teacher, you've probably been the envy of your friends: summers off, great pay, work until 3 p.m., and your job is playing with obedient kids. And, of course, never having to shell out your own money to provide the needed materials for your students.
Okay, now that you've had a good laugh, you should know that there is an organization that recognizes your sacrifice. The IRS! While minimal, it's better than nothing. In fact, there are several areas of the tax code you might not be aware of that could benefit educators.
Educator Expense Deduction
You've probably heard of the term Adjusted Gross Income (AGI), which is your income after certain adjustments. The Educator Expense Deduction is one of the adjustments on the 1040 (or 1040A, but not a 1040-EZ). You can take up to $250 off your income ($500 if your spouse is also a teacher) for items you purchased for use in your classroom.
To qualify for this deduction, you must be a teacher, instructor, counselor, principal or aide in a kindergarten through 12th grade school and you must have worked at least 900 hours in a public, private or religious school. These rules do not apply to college, pre-school and home-school educators.
The expenses can be pretty much anything that you use in your classroom. This includes: books, software, computer equipment, school supplies, mileage to extra-curricular activities you supervise (like coaching), professional development and more. However, you must have paid for the items out of your own pocket. If you are reimbursed by the district, school, or parent association, you cannot deduct the expense. It's always a good idea to keep records of purchases, especially if you are spending more than $250 a year, as you might qualify to take the additional expenses through itemizing.
Speaking of which, if you have more than $250 in educator expenses and you choose to itemize, there is a section on the Schedule A that allows you to write off "Unreimbursed Employee Expenses." This can include the remainder of your expenses beyond the $250 threshold you already entered. There's an important difference between income adjustments and itemized deductions, though. You can't start deducting expenses until they've surpassed 2% of your adjusted gross income. So if you earn $50,000 annually, you would need $1,001 in unreimbursed expenses to write off the first $1. After that, it's a dollar for dollar write-off.
One item you can write off here is union dues, which many educators contribute to annually. This is usually the biggest deductible expense for a teacher and an often-overlooked one.
One thing that you can't include in this section is most professional clothing. Unless you are required to purchase a uniform or clothing with the school name on it, you are not eligible to write off any clothing that could be worn outside of the classroom. For instance, if you are required to wear a suit to work as a principal, you cannot write off the purchase of the suit or dry cleaning expenses unless the school logo is embroidered on all parts of the suit, making it unlikely to be worn outside of the school.
However, if you are a PE teacher and are required to purchase school branded athletic wear to teach in, that could qualify. But buying cool athletic apparel that you wear to help coach the wrestling team is not deductible.
Teachers are among the hardest working professionals in our country. Make sure you have a tax pro comb through your expenses with you and don't miss a tax break courtesy of Uncle Sam. Next week, we'll look at tax tips for educators who are also life long learners, as well as the student loan interest deduction.
In the meantime, teachers enjoy the rest of your summer. You deserve it!