Teachers and Tax Reform: How the Tax Cuts and Jobs Act Affects Educators

We’ve been talking about tax reform and how it affects people from different walks of life, and today we’re taking a look at educators.

The Tax Cuts and Jobs Act has massively far-reaching effects—it is, after all, the most significant tax reform in about 30 years—and teachers were thrown for a loop with talks of eliminating the educator expense deduction.

So, what is the educator expense deduction? And is it really going away?

Tax reform and the educator expense deduction

The educator expense deduction allows qualifying teachers to deduct up to $250 of their unreimbursed expenses used specifically for the classroom.

You're considered an eligible educator for the tax year if: you were a teacher, instructor, counselor, principal, or aide; you served kindergarten through grade 12 at a qualifying school; and you worked for at least 900 hours per school year. Plus, if both you and your spouse are eligible educators, you each individually get up to $250 even if you file on the same return, for a max of $500.

So what’s with all the buzz about the educator expense deduction? Early this year, there were discussions about removing the deduction in the Tax Cuts and Jobs Act. In the end, however, the deduction remained in place and at the same amount of $250, so teachers can still save some money on their taxes by reporting unreimbursed classroom expenses.

What you can deduct

Any money you spend on books, supplies and computers can count toward your $250 deduction, as long as your school doesn’t reimburse those expenses. That includes everything from pencils, paper, computer software, equipment for your smart board, hand sanitizer, and that gorgeous Harry Potter box set you bought for your classroom.

The key? Keep good records of your expenses. Save your receipts and keep a running list of what you bought and how much it cost.

Other tax reform changes that could affect educators

Now, the educator expense deduction is specific to teachers, but there are other tax law changes that might affect you.

In prior years, teachers could potentially deduct more than the $250 by deducting unreimbursed employee expenses on Schedule A — the amount that exceeds 2% of your adjusted gross income (AGI). These expenses wouldn’t be limited to stuff in the classroom, but could also include travel, union dues and anything related to the teaching job that was paid out of pocket and not reimbursed by the school. Unfortunately, the Tax Cuts and Jobs Act did away with the miscellaneous deductions that exceed 2% of AGI on Schedule A.

There’s still some good news out there, though. Most taxpayers, including teachers, are likely to see a change in their paychecks or tax refund due to the increased standard deduction, and teachers with children of their own will see the benefit of the larger Child Tax Credit amount (be sure to check out the Child and Dependent Care Credit too—if your kids are in daycare while you teach, you could get a tax break for those care expenses).

The tax brackets have been adjusted too, so many more people will be taxed at a lower rate for greater income amounts. (How do tax brackets work?)

Stay up to date on tax reform

For more info on the Tax Cuts and Jobs Act, check out our Tax Reform 101 section in the Tax Guide, and remember to come back during tax season for a smart, simple e-filing experience!