School's only recently back in session, but teachers are about to lose a tax break that was just granted to them last year.
Virtually all of President Bush's sweeping tax cuts of the past few years came with expiration dates. And one of the first to disappear is one of the few aimed at middle- to lower-income educators. So teachers, take note: Now is the time to make sure you get this break in its final year.
The Educator Expenses Deduction, created in last year's Job Creation and Worker Assistance Act, allows educators in public or private elementary or secondary schools to deduct up to $250 in qualified expenses. To be eligible, a person must work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide.
The deduction was authorized only for 2002 and 2003.
The deduction was somewhat unusual in that it's an "above the line" deduction -- in other words, taxpayers don't need to itemize to claim it.
In 2001, 65% of taxpayers claimed the standard deduction rather than itemizing. It only makes sense to itemize if the total amount in itemized deductions is larger than the standard deduction. For 2003, the standard deduction is $4,750 for singles and $9,500 for married couples filing jointly.
If your expenses exceed $250, though, you might be able to deduct the remainder as an unreimbursed employee expense. Such expenses are considered part of the "miscellaneous itemized deductions" category, and are only deductible to the extent they exceed 2% of your adjusted gross income.
The $250 above-the-line deduction is a far easier break to take, and applies to most out-of-pocket costs for books and classroom supplies.
Eligible expenses include computer equipment (that includes software and services as well); other equipment (from hamster wheels to calculators); and supplementary materials used in the classroom. The supplies must meet the subject, though -- for instance, for courses in physical education, supplies must be related to athletics to qualify.
You don't need to submit your receipts with your 1040, but save them in case of an audit. Only expenses incurred in 2003 will be deductible on your 2003 return, so hit the stores before the year -- and the tax break -- runs out.