While every little bit helps, the educator expenses deduction is indeed relatively small. But because it's an adjustment to income and doesn't require itemizing expenses, more school employees should now be able to claim at least a portion of their class-related expenditures.
Before this above-the-line deduction was created, these costs could be claimed only if they were included as miscellaneous itemized deductions on Schedule A. Even then, the expenses were useless unless they and all other allowable costs totaled at least 2% of the filer's adjusted gross income.
For many years, this tax break for educators was temporary and had to be periodically renewed by Congress. But this deduction was made a permanent part of the tax code, thanks to the Protecting Americans from Tax Hikes, or PATH, Act of 2015, that became law in December 2015.
The educators' deduction also was enhanced. The $250 maximum deduction amount is now indexed for inflation. Low inflation kept that amount at the same level for the 2016 tax year, but in future years it could increase.
Plus, expenses for professional development now also can be counted in claiming this deduction.
Who can take deduction:
Who can claim costs?
The deduction is not limited to teachers. The IRS says you can take the deduction if, for the tax year, you were employed at a state-approved public or private school system and held one of a number of positions.
Your position can be with any class from kindergarten through grade 12 as long as you work at least 900 hours during the school year.
Couples who share education careers could get a double break if they file jointly. However, each spouse is limited to $250 of qualified expenses. That means if you spent $350 on school supplies and your husband spent $150 on his classroom, you can deduct only $400 on your return, even though your combined education expenses were $500.
What about home schooling? Sorry, but the tax law specifically states that costs for this type of instruction don't count toward the educator expenses deduction.
What items are deductible?
In addition to the new option to count professional development programs as part of this deduction, educators have a lot of other expenses they can use to claim it.
You can count unreimbursed costs for books, supplies, computer equipment (including software and services), and other equipment and supplementary materials used in the classroom.
Purchasing a new HD television ... may raise some IRS eyebrows.
The IRS also applies its "ordinary and necessary" rule here. To be considered ordinary, an item purchased for your classroom must be something that is common and accepted in the education profession. A necessary expense is one that is helpful and appropriate, but it doesn't have to be required to be considered necessary.
So buying a videotaped production of "Death of a Salesman" to help drive home Arthur Miller's points to your students would likely meet tax muster. But purchasing a new HD television upon which to watch it instead of using your school's working-but-old set may raise some IRS eyebrows.
Circumstances could limit expenses
In addition to the eligibility requirements, the IRS also has set some limits on the money spent on school supplies. Most notable is the restriction that could affect teachers who are continuing their own educations.
The IRS says when an educator uses any tax-favored funds to pay for his or her own schooling, those amounts must be subtracted from the total the teacher claims under the educator expenses deduction.
Take for example Joe Jones, a high school English teacher who is working toward his master's degree in literature during school breaks. He cashed in savings bonds to pay his tuition and excluded the bonds' $150 interest from tax. He also spent $200 for books on Shakespeare to distribute to his 11th-grade students. He must subtract the $150 in tax-free interest from the $200 for the books, leaving him only $50 to claim under the educator expenses deduction.
The same rule applies to nontaxable earnings a teacher gets from qualified state tuition programs or tax-free withdrawals from a Coverdell Education Savings Account.
Coordinating classroom claims
The educator expenses deduction is definitely great for taxpayers who don't itemize. But claiming it won't prevent you from taking other eligible itemized deductions on Schedule A.
If you're a teacher who usually itemizes to save on taxes, such as deducting home mortgage interest and property taxes, keep doing that. In fact, if you spent more than $250 on your class, take another look at the miscellaneous deductions line on Schedule A to see if you can use the excess to also claim this itemized tax break.
Just remember to take the educator expenses deduction on Form 1040, too. For example, if you spend $500 on classroom supplies, claim half of it directly on your Form 1040 as an educator expenses deduction. Then add the other half to your potential miscellaneous itemized deduction amount.
It might be just enough to allow you to take that tax break, too.