Tax tips for teachers: Deducting out-of-pocket classroom expenses

When it comes to making sure students have the tools for successful learning, school teachers commonly dip into their own pockets to pay for classroom materials. Fortunately, the Educator Expense Tax Deduction can offer teachers some financial relief.

The Educator Expense Tax Deduction

The primary tax break for teachers is the Educator Expense Deduction. To qualify for the Educator Expense Deduction for a given year, you must meet three criteria:

1. You worked as a teacher, instructor, counselor, principal or aide for students in kindergarten through 12th grade.

2. You worked at least 900 hours at a school certified by a state to provide elementary or secondary education. This applies to public, private and religious schools.

3. You spent money on qualified educator expenses.

The first requirement prevents college or other post-secondary teachers from claiming the deduction, while the second means homeschooling parents can't take it.

Qualifying educator expenses

Examples of items eligible for the Educator Expense Deduction include:

• books,

• school supplies,

• computer equipment (webcams, headset) and software,

• athletic equipment for physical education teachers, and

• generally, any purchased item that is appropriate for and helpful to the students and classroom.

You can deduct classroom expenses only if you haven't received reimbursement for them. If a school, teachers union, parent-teacher association or someone else paid you back for the money you spent on classroom materials, you can't deduct it.

COVID-related expenses

IRS is evaluating whether personal protective equipment (PPE) including sanitizer and plexiglass, are allowed as deductions under the Educator Expense Deduction. Once the IRS provides guidance on this topic, we will update here.

Claiming tax deductions

Teachers can claim the Educator Expense Deduction regardless of whether they take the standard deduction or itemize their tax deductions.

• A teacher can deduct a maximum of $250.

• Two married teachers filing a joint return can take a deduction of up to $250 apiece, for a maximum of $500.

For federal taxes for tax years through 2017,

• Your potential deduction isn't necessarily limited to $250 per teacher—so don't stop keeping track at $250. That's because your expenses in excess of $250 can count as "unreimbursed employee expenses."

• If you itemize, you can deduct “Job expenses and certain miscellaneous deductions.” This category of deductions must exceed 2% of your adjusted gross income. In addition to school-related unreimbursed employee expenses, you can include union dues, investment expenses, tax preparation fees, and certain other expenses to get over the 2% threshold.

• Some states (California for example) continue to provide this tax deduction after 2017 so, even though you might not get a break on your federal taxes, you might save some money on your state taxes.

Reducing your Educator Expense Deduction

Under certain circumstances, you may have to reduce your Educator Expense Deduction. According to the IRS, you must subtract the following from your deduction:

• Interest on U.S. savings bonds that you were able to receive tax-free because you used the money to pay for higher education expenses.

• Distributions from 529 plans that you didn't have to report as taxable income.

• Tax-free withdrawals from Coverdell education savings accounts.

Job-related teacher expenses for certain states

Can teachers write off a home office due to virtual teaching during the COVID-19 pandemic? At the federal level, those that are employed as teachers are unable to write-off unreimbursed employee expenses like a home office. However, if you live in one of the 7 states that opted to keep their own version of this tax benefit, you are in luck. The following states will provide a deduction on their respective state income tax returns:

• Alabama

• Arkansas

• California

• Hawaii

• Minnesota

• New York

• Pennsylvania

The deduction will be available on state taxes only as a miscellaneous itemized deduction, if you exceed the standard deduction limit.

Remember that in order to deduct home office expenses, you must have a dedicated space that you use exclusively for your job. For example, if you work at your kitchen table, it will not qualify.

Keep in mind that depending on which home office deduction method you choose, you may be able to deduct utilities too, like your internet bills. Keep track of all of these items.

Keeping track of expenses

Keeping good records of all your classroom expenses is key to claiming your tax deductible educator expenses.

• Save your receipts in a separate file.

• Consider recording all eligible purchases in an appointment book or planner.

• Try using special colors or codes so that you can find them easily.

Schedule C: Private tutors and pandemic pod teachers

Are you a teacher that also offers tutoring on the side? Private tutors who offer services to work with students in-person or virtually with distance-learning are typically considered self-employed and can deduct expenses that are both ordinary and necessary to the education business on Schedule C. If you provide tutoring, learn more about whether you are considered self-employed as a tutor, the tax implications and possible deductions.

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