The Educators’ Deduction, which educators were allowed to take for those little “must have” items that they need but are never in the school budget, was scheduled to expire in 2011. Enacted legislation restored this deduction through 2013. This benefit, limited to a maximum deduction of $250 for qualified out-of-pocket expenses, may seem small in comparison to other deductions. But, unlike some other tax breaks, it is used to reduce adjusted gross income; therefore, it has a direct link to taxable income. At the lowest income levels, this means a decrease of $25 in taxes owed. Every educator knows that $25 can be stretched a long way when buying needed supplies for their classroom. At higher income levels, the savings are even greater. The best part is that this deduction can be taken even if the taxpayer does not have sufficient deductions to itemize deductions on a Schedule A.
The Working Families Tax Relief Act of 2004 reinstated the educator expense deduction for both 2004 and 2005. As part of the Tax Relief and Health Care Act of 2006, Congress extended the Educator Expense Deduction for both 2006 and 2007. Then, as part of the Emergency Economic Stabilization Act of 2008, it was extended for 2008. It was extended to 2009 as part of the Emergency Economic Stabilization Act of 2008. It was extended again to 2010 as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Finally, the 2012 American Taxpayer Relief Act extended the credit through the end of 2013. The deduction is available to eligible educators in public or private elementary or secondary schools. To be eligible, a person must work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide.
The IRS suggests that educators save the receipts for any books and classroom supplies purchased. Put them in a folder or envelope labeled “Educator Expense Deduction.” Be sure to indicate the date, amount and purpose of each purchase. Based on most teachers who I know, coming up with $250 in receipts will not be a difficult thing to do.
For more information on this subject, call the IRS Tele-Tax system toll-free at 1-800-829-4477, then select Topic 458, or contact Henssler Financial at 770-429-9166 or experts@henssler.com.
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