What is the teacher expense deduction?

Below is the second post which provides tips on tax deductions for pre-kindergarten teachers from financial consultant, Steven Daar. Please read through to fully understand the “teacher expense deduction”, and what pre-kindergarten teachers can/cannot deduct. (And if you think it’s unfair, there’s a call to action at the bottom!)

The Teacher Expense Deduction:

This deduction is one I believe pre-kindergarten teachers get the short end of the stick. The IRS allows educators to deduct $250 each year for money spent on teacher or classroom supplies and materials. However, this deduction is only provided for K-12 teachers and not pre-school teachers.

What pre-kindergarten teachers are allowed to do is this: if they itemize their deductions on Schedule A of their tax form (rather than taking the standard deduction), they may deduct expenses that are in excess of 2% of their adjusted gross salary. For example: if your adjusted gross salary is $25,000, you can only claim a deduction on your expenses that exceed $500. If you spent $700 on classroom materials, you could then deduct $200.

This is inherently unfair as pre-kindergarten teachers have out of pocket classroom expenses just as K-12 teachers do, but K-12 teachers get a deduction on the first $250 they spend but pre-K teachers only get a tax break if they spend more than 2% of their salary on classroom materials, which is hard to do! Not only that, but the K-12 teachers get the deduction on the Form 1040 rather than on Schedule A. Translation: No matter whether you itemize or take the standard deduction, expenses reported on the Form 1040 are granted a tax deduction. This means the K-12 teachers get the tax break no matter what while pre-K teachers needs to both:

A) Spend over 2% of their salary on classroom expenses and
B) Take itemized deductions over the standard deduction on their taxes

I do have some good news on this though! There is currently a bill in Congress that extends the Teacher Expense deduction through 2017 AND offers it to pre-K teachers in addition to K-12 teachers. It is the Teacher Tax Deduction Enhancement Act of 2011. The bill is currently in a House of Representatives committee. I suggest you write or email your senators & district’s congressperson to help get this bill passed and allow our pre-K teachers to take what is probably the most useful teacher deduction. (Visit this site writerep.house.gov/writerep/welcome.shtml as one method of contacting your representative.)

As mentioned in the post Pre-K teacher tax deductions – in order to accurately be able to take these deductions, you need to keep your receipts for job-related expenses. When it comes time to fill out your taxes, either bring the receipts to your accountant/tax preparer. Or if you prepare your own tax forms, use the receipts to add up the amount of money you spent on job-related expenses.

Did you find this information useful to you?

Do you want to learn more about financial issues affecting early educators (such as what are some of the best retirement plans)? Let us know via comment or email so we can get this information to you!

Steven Daar is a graduate from the University of Illinois in Urbana – Champaign’s Business School with a degree in Finance. Steven Daar has put together many articles for teachers at his website teachersretirementhelp.com.