Tax season can serve as an unwelcome reminder to teachers that they don鈥檛 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鈥檚 paltry $50 increase of the , EED, from $250 to $300鈥攖he first increase since the enacted the deduction in 2002.
Advocates have said it鈥檚 not enough, and there鈥檚 underway to boost it to $1,000.
鈥淲e 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,鈥� 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鈥檚 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 when calculating their taxable income.
, 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 ) 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 鈥渘ecessary evil鈥�. But some educators qualify for free professional tax assistance. The IRS鈥檚 program, or VITA, offers free basic tax return preparation to qualified individuals who earn less than $64,000 annually. 鈥淎 lot of time, VITA programs are staffed by retired tax professionals who want to give back,鈥� said O鈥橲aben.
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鈥攚hether from tutoring, Ubering, bartending, or any other number of second jobs educators take on, O鈥橲aben points out.
鈥淔olks need to realize that [secondary] income is going to be stacked on top of other income,鈥� 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鈥檚 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 鈥渞emoved all personal tax deductions that were based on exceeding two percent of an individual鈥檚 adjusted gross income,鈥� according to , 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鈥橲aben suggests that educators ask their employers if it鈥檚 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.
鈥淭he human resources department at a school district is a good place to start [with questions about reimbursement],鈥� O鈥橲aben said. 鈥淵ou can do all kinds of searches on the Internet, but you really need to go to the source.鈥�
