As an educator, you are no doubt aware that you can claim the money you spend on classroom supplies as a deduction on your taxes. On the surface, it may seem quite simple–you buy the stuff throughout the year and, at tax time, and you claim that amount when it’s time to file.
Unfortunately, there are some limitations to the deductions you can take and, if you’re not aware of what those are, they can come back to haunt you later. Before you go shopping for any more supplies, here are some things you should know about the Educator Expense Deduction.
Who Qualifies for the Deduction?
You will only qualify for the deduction for that tax year if:
· You are a teacher, instructor, teacher aide, counselor or principal in grades K-12, and
· You accrue at least 900 hours during the school year.
If you are full-time you should have no trouble qualifying. However, if you are a substitute teacher, or part-time, you should double-check your hours before you try to apply the deduction.
What Expenses Qualify?
The IRS allows you to deduct ordinary and necessary expenses which include:
· Equipment, including computer equipment, services, and software, and
· Supplementary classroom materials.
You cannot deduct for home-schooling or for non-athletic supplies in physical education classes. This means that the notebooks and pencils you supply for scorekeeping in your basketball class might not qualify.
Additionally, if you provide snacks for students who might not otherwise have food during the school day, that also might not qualify. If you are unsure as to whether an item counts as a deduction, you can consult the school administration, your accountant, or tax professionals like the people at Authority Tax Service.
How Much Can You Deduct?
Here’s where things get sticky. Although you are allowed to take deductions, you are not allowed to deduct everything. In fact, for 2013, you are only allowed to deduct $250. This means that if you spend $500 on an iPad for the classroom, and then another $100 on pencils, notebooks, paper and binders, you’ll only be able to recoup less than half of what you spent.
However, if you and your spouse are both educators, and you are filing jointly, you can each deduct up $500. Which means you could recoup most of $600 you spent, so long as your spouse does not have his own education deductions.
While most educators are allowed a maximum of $250, there are some situations that can actually reduce your educator expense reduction, or render you completely ineligible:
- If you have received any nontaxable interest on U.S. series EE and I savings bonds,
- If you have received any nontaxable qualified state tuition program earnings,
- If you have received any nontaxable earnings from Coverdell education savings accounts, and
- If you have received any reimbursements for expenses that were not reported to you on your Form W-2, box 1.
Applying the deduction when any of the above applies could result in your tax return garnering closer scrutiny from the IRS. Professional tax help like Authority Tax Service can highlight these potential pitfalls, as well as other things that can trip you up.
Alternatives to the Educator Expense Deduction
If you don’t qualify for the educator deduction, or if you have more than $250 in qualified expenses, you may be able to deduct them as an unreimbursed employee expense. However, because this is considered a miscellaneous itemized deduction, you can only use it if the expenses exceed two percent of your adjusted gross income.
This means that if you have an adjusted gross income of $50,000, your expenses must exceed $1,000 to qualify.
For example, if you spent $500 on a mini iPad, $100 on pencils and other stationery, and $1,000 on miscellaneous expenses, you will have a total of $1,600 in expenses. If you deduct $250 as an educator expense, that leaves $1,350, but can only deduct $350 – the amount over $1,000. Or you can deduct the full $600 in education expenses as a miscellaneous expense, but only if you have not claimed any of it as an educator expense deduction.
As you can see, the educator expense deduction is not as simple as it appears on the surface. Additionally, tax codes change each year including the limits and qualifications for this deduction. This is why you should think carefully, or consult a professional, before applying this deduction to your taxes.