Tax Season Is Here! These Are the
Teacher Tax Credits & Deductions You Need to Know About
Dave Grant
Don’t do your taxes without reading
these tips.
It’s that time of year again—time to
file your taxes. We all know people who can’t wait to file so they can get
their refund, and others who drag their feet until April 15th, then
on extension until October 15th and just can’t get it done.
But as a teacher, you’ve got some
unique advantages when it comes to tax time. Some tax benefits are only
available to educators, and other general tax benefits can be used by educators
to save even more money. By utilizing these lines in the tax code, you can
lower your tax bill and, potentially, receive a larger refund.
Educator
Expenses Deduction
For those who do not get
reimbursed on their purchases for the classroom, $250 can be deducted from your
income. This reduces the amount of your income that is taxed. This deduction is
limited to $250 in classroom supplies, but if you are married to an educator,
it can be doubled-up to a maximum of $500. You need to have proof that you have
spent money on these things (i.e. receipts), but even if don’t spend $250, you
can use whatever amount that you did spend.
For those of a technical nature,
this is known as an “above-the-line deduction”, so even if you don’t itemize on
your taxes, you can still use this deduction. In order to use this deduction,
you do need to have spent 900 hours in the classroom that tax year.
Unreimbursed
Employee Deductions
If you do spend over $250 on
classroom supplies, don’t worry. If you itemize on your tax returns, then the
amount of unreimbursed expenses above $250 can be deducted. One thing to note
about this is only the amount that exceeds 2% of your adjusted gross income
(AGI) can be deducted—the amount below this is not counted. So, what can be
included in these unreimbursed purchases?
- Books and Newspapers—for the classroom or personal
development.
- Mileage—for time spent traveling to teach in other
locations or to sports events for which you coach. It does not include
mileage spent on commuting.
- Software & computer equipment—if it is mandated
that you purchase software to teach your lessons, this can be deducted. If
you spend time in your home office researching and sending emails for work
purposes, track the time and then this can be deducted.
- Professional Development—if you pay to attend
conferences or development days, you can deduct the expenses associated
with this. This can be parking, food, enrollment fees, mileage, and
accommodation.
- Work Clothing—if your class requires you to wear safety
gear that you have to purchase yourself then, you guessed it, it can be
deducted when you itemize on your return.
Student
Loan Interest
Regardless of if you itemize, the
interest you pay on your student loans can be deducted. It’s another
“above-the-line deduction”, so it’s more powerful in reducing your tax bill
than some others mentioned here.
Education
Credits and Deductions
For those who are gaining further
education and having to pay for it out of their own pocket, you can either use
the Education Tax Credit, American Opportunity Credit or Lifetime Learning
Credit. However, only one of these can be used at a time and are subject to
income requirements—you’ll need to do the math to determine which one you’re
eligible for and is most valuable for you.
- Education Tax Credit – this reduces the income subject
to taxation by $4,000, and is for expenses paid for undergraduate and
post-graduate It doesn’t include room & board, but does include
most other expenses paid to acquire the education. As an item that can be
used even if you don’t itemize, it’s the most powerful deduction from a
dollar perspective.
- The American Opportunity Credit is a tax credit of up
to $2,500 on tuition, fees and course materials for an undergraduate
You earn the credit on 100% of the first $2,000 paid, and then 25% of the
next $2,000. For example, if you paid $5,000 to attend a class (or if your
child did), then the full $2,500 credit would be available. However, if
the class cost $2,750, then $2,000 would be available for the first $2,000
spent, but only $187.50 credit for the $750 spent thereafter.
- The Lifetime Learning Credit is available for each
student in a household, regardless of what level of post-secondary
schooling they’re in. It is used to reduce the overall income subject to
taxes by a maximum of $2,000. Therefore, if there are four students in the
household, only $2,000 of credit would be applied, not $8,000.
As you can see, there are many
resources that are available to educators to reduce their taxes. However, some
of them do get complex and it can be easy to make mistakes when filing your own
return. If you have questions about which of these items apply to you, please
contact a tax professional.
