The flood of education-related tax advice that seems to crest during back-to-school season often centers on students or their parents. But teachers can score a few tax breaks, too — if they do their homework. Three tax pros share their own lesson plans for cutting teachers’ tax bills.
1. Educator Expense Deduction
WHAT IT IS: A $250 deduction to help recoup out-of-pocket costs for outfitting a classroom, getting training or buying teaching materials.
HOW IT WORKS: K-12 teachers can take this deduction regardless of whether they itemize on their taxes or take the standard deduction. They’re not the only ones eligible for this tax break, though. School counselors, principals or aides may also be able to take the educator expenses deduction if they worked at least 900 hours in a qualifying school during the school year, says Tracie Miller-Nobles, a certified public accountant and member of the American Institute of CPAs’ National CPA Financial Literacy Commission.
If your spouse is also a teacher and you’re filing jointly, you might qualify for a bigger deduction. “Sometimes individuals don’t realize that if they’re married and both spouses are eligible educators, they actually get $500 for that deduction,” she says.
2. Charitable Contribution deductions
WHAT IT IS: A tax deduction for donations to charitable organizations, including nonprofit schools.
HOW IT WORKS: If the educator expense deduction doesn’t cover everything a teacher has spent out of pocket for items that end up belonging to the school, teachers might be able to deduct the rest as a charitable contribution, says Lauri Pitcher, a CPA and president and CEO of accounting firm Lucia & Co. in San Bernardino, California.
Taking this deduction will require good record-keeping; it may also require working with the principal or other school administrators to get receipts that will substantiate the donations, she says. Also: You have to itemize on your tax return to deduct charitable contributions. So if you plan on taking the standard deduction — which has nearly doubled under the new tax rules — this tactic might not be for you.
3. Lifetime Learning Credit
WHAT IT IS: A tax credit — which is a dollar-for-dollar reduction in your tax bill — equal to 20% of the first $10,000 spent on tuition and fees. The maximum credit is $2,000 per return.
HOW IT WORKS: The Lifetime Learning credit is available to graduate students, which means it can be a great tax break for teachers who are pursuing a master’s degree, says Melinda Nelson, a CPA and partner at accounting firm Henry + Horne in Tempe, Arizona. Teachers who are simply taking classes to improve job skills can also qualify — pursuing a degree isn’t required.
You may qualify for this tax credit if your modified adjusted gross income (MAGI) is $66,000 or less ($132,000 or less if you file jointly). If your MAGI is between $56,000 and $66,000 ($112,000 to $132,000 if you file jointly), you can get a reduced credit. You can’t get the credit if your MAGI is over $66,000 ($132,000 if filing jointly).
4. Free File and VITA programs
WHAT THEY ARE: For do-it-yourself taxpayers, Free File is an IRS program that provides free brand-name tax software to people whose adjusted gross income is below a certain threshold. For people who want human help, the Volunteer Income Tax Assistance program (VITA) is a federal grant program that helps local organizations offer free in-person tax-prep services to low- and moderate-income people.
HOW THEY WORK: You probably qualify for Free File if your adjusted gross income is under the limit (currently $66,000). Note that even if the software for your federal tax return is free, there might be a fee for your state tax return. Visit the IRS’s Free File website to check your eligibility and find the right software package. For VITA, the income limit generally is $54,000; the IRS website also has a VITA directory that can help you find a program in your area.