The tax reform of 2017 kept the $250 above-the-line deduction for classroom supplies, and it's still available for the 2019 tax year. The $250 deduction is particularly advantageous because it is above the line on Schedule A, which means you don’t have to itemize to take it and it reduces your overall adjusted gross income (AGI).
This becomes even more important under the most recent tax reform, which virtually doubled the standard deduction, setting the threshold even higher for choosing to itemize. Legislation in 2015 indexed the amount to inflation—though it is unchanged at $250 for 2019—and allows professional development expenses to be included in the deduction. If both spouses filing jointly are educators, each can claim the deduction, for a total of $500.
However, the tax reform, officially known as the Tax Cuts and Jobs Act, eliminated itemized deductions for employee business expenses starting in 2018 for the 10-year life of the act. This had allowed educators to itemize expenses beyond the $250 as deductions, subject to the 2% threshold of AGI for miscellaneous deductions.
Educators may still 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 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.
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 advisor or reliable tax software that clearly addresses your situation, especially if you are in the higher income brackets. And keeping receipts or a careful log is critical for the classroom supplies deduction and other tax benefits.
Here are a few additional situations faced by educators preparing their taxes:
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, your best option is to specify 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 remaining 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.
Other unreimbursed employment expenses
As noted above, the itemized deductions for employee expenses beyond the $250 have been eliminated in the tax reform, so that deduction is no longer available.
Rules for deducting expenses for a home office 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.
A last-minute tax revision in Congress in 2019 retroactively extended the deduction for college tuition and fees, which had expired at the end of 2017, to include the tax years 2018, 2019 and 2020. This allows you to deduct up to $4,000 above the line, so you don’t have to itemize to claim it. Those wishing to claim it for 2018 will have to file an amended return.
Extension of the tuition deduction leaves in place the Lifetime Learning Credit for 20% of education expenses up to $10,000, or a maximum credit of $2,000. This is a credit, so it is taken off your tax liability dollar for dollar. However, it is nonrefundable, which means you have to have some tax liability for it to count against.
The American Opportunity Credit, which can apply to the first four years of higher education, is not usually an option for educators since most have already completed a four-year degree. However, this credit can be claimed for their dependent(s). Taxpayers can choose only one of the three options for qualified education expenses.
NOTE: All of the information in this article is accurate as of January 9, 2020.