Teachers give so much to their students. They give them knowledge, fuel their imaginations, and encourage exploration into new subjects. And to best meet the needs of their students, 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).
The old miscellaneous itemized deduction
Before 2018, employee expenses were 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.
These expenses had to be claimed as a miscellaneous itemized deduction and were subject to a 2 percent of adjusted gross income (AGI) floor. This meant employees, including teachers, could enjoy a tax benefit only if they itemized deductions (rather than taking the standard deduction) and all their deductions subject to the floor, combined, exceeded 2 percent of their AGI.
Now, the TCJA has suspended miscellaneous itemized deductions subject to the 2 percent of AGI floor for 2018 through 2025. However, qualifying educators can still deduct some of their unreimbursed out-of-pocket classroom costs under the educator expense deduction.
Educator expense deduction
Back in 2002, Congress created the above-the-line educator expense deduction because, for many teachers, the 2 percent 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 because the TCJA’s nearly doubled the standard deduction, which means fewer taxpayers will benefit from itemizing.
Qualifying elementary and secondary school teachers and other eligible educators (such as counselors and principals) can deduct up to $250 of qualified expenses. If you’re married filing jointly and both you and your spouse are educators, you can deduct up to $500 of unreimbursed expenses — but not 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.
Many rules, many changes
Some additional rules apply to the educator expense deduction. The TCJA is making the upcoming tax year complicated for many. It’s important to know the rules and take advantage to the benefits. We can help. We’ve been helping individuals and businesses with their tax planning for more than 45 years. One important piece of advice is: Don’t wait. If you have questions, contact Eden LaLonde, CPA, MAcc, Ciuni & Panichi Tax Department Senior Accountant, at ELaLonde@CP-advisors.com or 216-831-7171 us for more details or to discuss other tax deductions that may be available to you this year.
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