Filling out your tax returns and keeping track of deductions remains as complicated as ever. One benefit that’s still around is the educator expense deduction. To help you get the tax breaks you’re entitled to, it’s critical to keep receipts or a careful log for the classroom supplies deduction and other tax benefits. When reviewing your deduction options, remember that many provisions of the tax code have income caps and phase-outs and other wrinkles that may affect your actual tax liability.
Be sure to work with a tax adviser or use reliable tax software that clearly addresses your situation, especially if you are in a higher income bracket. (Search for NEA member discounts and cash-back offers on tax prep software through our NEA Discount Marketplace.)
Here’s a rundown of what has changed from the 2022 tax year to help you as you work on your 2023 tax forms and find tax deductions that can help you recoup some of your educator expenses.
Expansion of the Educator Expense Deduction
The above-the-line deduction for classroom supplies has been kept at $300 for the 2023 tax year, up from $250 in 2021. The limit will rise in $50 increments in future years based on inflation adjustments. This deduction is particularly advantageous because it’s above the line on Schedule A, which means eligible educators don’t have to itemize to take it, and it reduces your overall adjusted gross income (AGI).
If both spouses filing jointly are educators, each can claim the tax deduction, for a total of $600 (but not more than $300 for each spouse). This above-the-line deduction has become even more important since the 2017 tax reforms, which virtually doubled the standard deduction, setting the threshold even higher for choosing to itemize.
The cost of classroom supplies has risen, along with most other costs, as inflation has surged. Most educators will have no difficulty meeting the higher deduction amount. As a teacher, you may count costs for buying personal protective equipment (PPE) for the school year—masks, sanitizer, Plexiglass, etc.—as qualified expenses when claiming the $300 classroom supplies deduction.
As tempting as it may be to try, educators cannot deduct a dedicated home office or unreimbursed expenses above $300—at least not on federal returns. The 2017 Tax Cuts and Jobs Act eliminated that deduction. However, there are a few states that do still allow it if itemized expenses are higher than the standard deduction: Alabama, Arkansas, California, Hawaii, Minnesota, New York and Pennsylvania. If you live in one of these states, consult your tax adviser to see what’s tax deductible.
Expiration of the Charitable Donations Deduction
Note that the special deduction for up to $300 has expired. You can deduct charitable contributions only if you itemize. This has become more difficult since the standard deduction was increased, and it will rise again for the 2023 tax year. Singles can claim a standard deduction of $13,850 for 2023, up from $12,950 for 2022. Married filing jointly get a standard deduction of $27,700, compared with $25,900 in 2022.
Itemize for the State Sales Tax Deduction
Educators may also benefit from the state and local sales tax deduction (an alternative for states with no state income tax to deduct from federal taxes) even though those breaks don’t target them specifically. However, you must itemize in order to claim these deductions.
For the 2018 tax year and beyond, the federal itemized tax deduction for state and local taxes—including property taxes—was capped at $10,000, and the threshold for choosing to itemize became much higher with the increased standard deduction.
ADDITIONAL TAX SITUATIONS FOR EDUCATORS
Income from outside work, such as a summer job or tutoring
If there is no additional withholding on this outside work, you want to be sure to avoid a penalty for under-withholding—i.e., when your overall tax liability exceeds the amount of tax you had withheld by certain margins.
If this is the first year you’ve had extra income, there won’t be any penalty, because your withholding at work will cover 100% of your previous year’s income.
If you regularly have extra income, consider specifying a certain additional amount on your W-4 to be withheld. Previously, it was possible to adjust your withholding by reducing the number of personal exemptions, but these have now been removed in the tax reform. The other option is to make quarterly payments of estimated tax on the additional income.
The outside income should be reported on a Schedule C, where you can also deduct any expenses associated with the outside job. You are also liable for “payroll” taxes (these are the contributions to Social Security and Medicare) on the extra income, which is calculated on a Schedule SE.
Unreimbursed expenses related to employment
As noted above, the itemized deductions for employee expenses beyond the $300 have been eliminated in the tax reform, so that federal deduction is no longer available.
Rules for deducting expenses for a home office for self-employed individuals are fairly strict (as well as for equipment such as computers). The home office space must be used exclusively for work purposes, which is a tough criterion to meet.
Deducting education expenses
The Lifetime Learning Credit is for 20% of education expenses up to $10,000, or a maximum credit of $2,000. This is a credit, so it’s taken off your tax liability dollar for dollar. However, it’s nonrefundable, which means you have to have some tax liability for it to count against. This is not limited to undergraduate education, nor do you have to be pursuing a degree, so educators may make use of this for their own career development.
The American Opportunity Tax Credit, which can apply to the first four years of higher education, isn’t usually an option for educators since most have already completed a four-year degree. However, this credit, which is capped at $2,500, can be claimed for their dependent(s). Taxpayers can choose only one of the two remaining options for qualified education expenses.
Save on tax prep software with your NEA membership
As an NEA member, you can earn cash back when you purchase tax prep products and services, such as TurboTax, H&R Block and more, through NEA Discount Marketplace. Look under the “Office Supplies” filter and click on “Finance & Tax Prep” to find available offers to members during this tax season.
NOTE: All of the information in this article is accurate as of February 29, 2024.
