Tax season can serve as an unwelcome reminder to teachers that they don’t earn as much as they would like to, a problem exacerbated in recent years by continuous increases in the cost of living and relatively flat salaries.
Teachers hoping for some relief in the form of tax deductions likely were underwhelmed with last year’s paltry $50 increase of the Educator Expense Deduction, EED, from $250 to $300—the first increase since the Internal Revenue Service enacted the deduction in 2002.
Advocates have said it’s not enough, and there’s legislative activity underway to boost it to $1,000.
“We know from our 2023 back-to-school survey of teachers, a 97 percent majority of respondents annually spend an average of $673 of their own funds to support their classroom needs,” said Colin Sharkey, executive director of the Association of American Educators and the AAE Foundation.
But there are other ways for educators to save money at tax time. Read on to learn about strategies to incur savings.
Recognize that each state’s tax incentives vary
No two states offer the same tax breaks to residents. For instance, 37 states plus the District of Columbia allow taxpayers whose incomes fall under a certain income level to deduct student loan interest when calculating their taxable income.
Tom O’Saben, director, tax content & government relations for the National Association of Tax Professionals, recommends that educators log on to tax sites of the state where they reside (like https://www.marylandtaxes.gov/) to learn more about deductions, credits, and other (state-specific) tax benefits.
Know that your income could qualify you for free tax preparation assistance
Many income earners view doling out money for professional tax preparation as a “necessary evil”. But some educators qualify for free professional tax assistance. The IRS’s Volunteer Income Tax Assistance program, or VITA, offers free basic tax return preparation to qualified individuals who earn less than $64,000 annually. “A lot of time, VITA programs are staffed by retired tax professionals who want to give back,” said O’Saben.
Be aware of potential tax ramifications from secondary income streams
Many teachers have side hustles or part-time jobs, whether to help cover the cost of daily living expenses or save up to buy a house. But if these extra income streams push educators into a higher tax bracket, they may not be worth the time and energy required to accrue additional income—whether from tutoring, Ubering, bartending or any other number of second jobs educators take on, O’Saben points out.
“Folks need to realize that [secondary] income is going to be stacked on top of other income,” he said. Further, educators who earn money as independent contractors will need to keep track of their expenses, some of which may be tax deductible.
Ultimately, educators need to consider if it’s worthwhile to exert the extra time and effort that comes with working additional hours, tracking expenses (if employed as an independent contractor), and moving up into a higher income tax bracket.
Consider asking your employer for reimbursement
The Tax Cuts and Jobs Act “removed all personal tax deductions that were based on exceeding two percent of an individual’s adjusted gross income,” according to Justia, a website that provides information on legal issues, such as taxes. For teachers, such deductions included unreimbursed job expenses like teacher union dues or travel related to professional development.
As a result of this act and the subsequent loss of the ability to deduct these items, O’Saben suggests that educators ask their employers if it’s possible to be reimbursed for qualified out-of-pocket expenses beyond those covered by the $300 Educator Expense Deduction. Schools or districts may have an expense budget to submit these types of items, like travel for PD, for reimbursement, he added.
“The human resources department at a school district is a good place to start [with questions about reimbursement],” O’Saben said. “You can do all kinds of searches on the Internet, but you really need to go to the source.”