Final year for classroom expense deduction for educators
The IRS recently reminded teachers and
other education workers to save their receipts for books,
equipment, and other supplies they buy for their classrooms.
Up to $250 of qualified out-of-pocket classroom expense may be
deducted above-the-line for 2003.
The deduction was created by Congress
when it enacted the Job Creation and Worker Assistance Act of
2002 (JWCA). However, it is temporary. It is available only
for the 2002 and 2003 tax years. Prior to this law, these
out-of-pocket expenses could only be claimed as deductions if
the taxpayer’s total miscellaneous expenses exceeded two
percent of his or her adjusted gross income (AGI).
Eligible taxpayers and expenses
To take advantage of the deduction, an
individual must work at least 900 hours during the school year
(refers to a school year rather than tax year) as a teacher,
instructor, counselor, principal or aid. The school must be an
elementary or secondary school, either public or private.
--Example: Philip taught more than 900
hours for the 2002 tax year, but not 900 hours in the school
year of September 2001 through June 2002. Philip cannot deduct
classroom expenses for the January 2002-June 2002 time frame.
Expenses qualifying for the deduction
include books; supplies (glue, paper, pens, and scissors);
computer equipment and software. Athletic equipment is
generally ineligible.
These expenses must be out-of-pocket. If
the taxpayer is reimbursed by the school, the expenses are
ineligible for the deduction. For only partial reimbursements,
the taxpayer may qualify for the deduction for the
unreimbursed portion.
Savings
The above-the-line deduction enables
educators to subtract the expense when calculating their AGI.
The $250-maximum deduction is available regardless of whether
the taxpayer itemizes on Schedule A or not.
Substantiation
Educators must be able to demonstrate
that the expense is ordinary and necessary. Receipts and other
records must be kept to substantiate expenses. To prevent a
missed deduction at tax time, the IRS has suggested that
educators maintain their records of qualifying expenses in a
folder labeled “Educator Expenses Deduction,” noting the date,
amount and purpose of each purchase.
