CARL WATTS & ASSOCIATES

July 22, 2013

www.carlwatts.com
office@carlwatts.com
Washington DC
 tel/fax 202 350-9002
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Working as an educator can be a very beautiful and rewarding experience, and there are over 7 million teachers in the United States, with almost 3 million teaching at the elementary and middle school levels.

These figures may not be of common knowledge, but certainly everybody knows that teachers are often underpaid and that funds for public education are never enough.

In order to lighten the tax burden for teachers, the IRS offers specific deductions and credits that you shouldn’t overlook.

The Educator Expense Deduction is designed for eligible educators who have certain out-of-pocket expenses during the tax year.

You are an eligible educator if, for the tax year, you meet the following requirements:

  • You are a kindergarten through grade 12 teacher, instructor, counselor, principal or aid, and
  • You work at least 900 hours a school year in a school that provides elementary or secondary education, as determined under state law.

The IRS allows you to deduct up to $250 ($500 if married filing joint and both spouses are educators, but not more than $250 each) of any unreimbursed expenses you paid or incurred 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, expenses for supplies are qualified expenses only if they are related to athletics.

Qualified expenses are deductible only to the extent the amount of such expenses exceeds the following amounts for the tax year:

  • The interest on qualified U.S. savings bonds that you excluded from income because you paid qualified higher education expenses,
  • Any distribution from a qualified tuition program that you excluded from income, or

  • Any tax-free withdrawals from your Coverdell Education Savings Account.

You may claim this deduction on Form 1040, Line 23 or Form 1040A Line 16; it is not an itemized deduction, meaning that even if if you are taking the standard deduction, the educator expense deduction can be taken.

In addition to supplies for inside the classroom you can also deduct a handful of other related expenses including gas spent on field trips, subscriptions to academic journals, and even fees paid in union dues.

If you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit on Schedule A, Line 21.

If you tutor students after hours or during the summer and are paid directly by the student rather than by the school, you are considered self-employed. You can deduct the cost of traveling to meet with students, expenses such as office supplies to keep track of tutoring schedules, fees, and student progress and any equipment or supplies purchased to help the students being tutored. These deductions are made on Schedule C, which is the self-employment schedule. In addition, you will be able to take one-half of the self-employment tax as a deduction on Form 1040.
Educators and Tax
Deductions & Credits
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It is very important to keep all receipts from purchases you want to deduct. Without your receipts, you will have no way to prove to the IRS that you made the purchase if you were ever audited.

Many teachers are required to take courses continually to stay up to date in their field. These courses are not always reimbursed by the school.

If you pay for the continuing education out of pocket, the cost is tax-deductible. This deduction is called the Lifetime Learning Credit and is taken on the Form 8863. The credit is for 20 percent of the cost of the courses taken and is limited to $2,000 per year. This is a tax credit which means it reduces the tax bill dollar-for-dollar instead of lowering taxable income.


The American Opportunity Tax Credit is offered to students who pay qualified tuition (and aren’t claimed as dependents elsewhere). This tax credit allows you to claim up to $2,500 per student. The full credit is available for individuals with a Modified Adjusted Gross Income of $80,000 or less, $160,000 for married filing jointly. It is 40% refundable, meaning that you can get up to $1,000 back even if you don’t owe taxes.


You can claim this credit on Form 8863, that is if you don’t claim the Lifetime Learning credit.


If you don't qualify for either of these, you may qualify to deduct educator expenses using the tuition and fees deduction or the employee business expense deduction. You can't use more than one credit or deduction for the same expense.

If you are looking for a new job in the teaching profession, you can deduct expenses related to that job search, subject to certain rules. You must itemize your deductions, and job-hunting expenses are subject to the 2 percent rule. Meals and overnight lodging qualify if your search takes you out of town. You can also deduct fees for an employment agency if you use one to help you search for a new teaching position.

If you are moving more than 50 miles away from your current home to take a new teaching job, you can deduct your moving expenses, even if it is your first teaching position. You can deduct the cost of moving your personal belongings and household goods, as well as the costs incurred by driving your own car at the standard 2012 mileage rate of 23 cents per mile. Parking and tolls are also deductible. You do not have to itemize to claim these deductions.

If you have any doubt about whether an expense is an eligible deduction, consult with a tax professional.

Many states and local governments also offer incentives for teachers and educators so be sure to speak with a local professional, or check with your state's revenue department to see if any other benefits are available.