The recently enacted Working Families Tax Relief Act of 2004 (H.R. 1308) extended the popular $250 annual tax break retroactively back to January 1, 2004 and forward through 2005 permitting teachers and other education professionals will be able to deduct up to $250 in unreimbursed out of pocket classroom expenses for two more years. Educators must keep receipts for paper, printer cartridges, crayons, and other qualifying classroom supplies for 2004 tax preparation. Qualifying classroom expenses include paper, pens, printer cartridges, scissors, glue, and other items. Expenditures above $250 may be deductible if the taxpayer itemizes his or her return and the expenses are deductible as miscellaneous itemized deductions, subject to the two-percent of adjusted gross income floor.
Qualifying taxpayers must work at least 900 hours during the year as a teacher, principal, counselor, aide, or instructor. In addition, eligible taxpayers must be engaged in elementary or secondary education. Public and private K-12 schools qualify. Some states have created similar deductions.
Internal Revenue News Release IR-2004-124, October 13, 2004.
[Code Sec. 62]
Educator expense deduction: Reinstatement: Receipts. –The IRS has advised teachers and other educators to save the receipts for unreimbursed expenses that they have incurred for books and other classroom supplies. The educator expense deduction (Code Sec. 62(a)(2)(D)), which expired at the end of 2003, has been retroactively reinstated as of January 1, 2004, by the Working Families Tax Relief Act of 2004 (P.L. 108-311); thus, expenses incurred at any time in 2004 qualify for the deduction. Under this provision, an educator who works at least 900 hours during the school year in a public or private elementary or secondary school may subtract up to $250 of qualified out-of-pocket expenses when figuring adjusted gross income. Because this is an above-the-line deduction, it is available regardless of whether the educator itemizes deductions. Back reference: ¶6006.128.
The Internal Revenue Service advised teachers and other educators to save their receipts for books and other classroom supplies. They will be able to deduct up to $250 of such expenses again this year, following recently-enacted legislation.
The Working Families Tax Relief Act of 2004 reinstated the educator expense deduction, which had expired at the end of last year, for both 2004 and 2005. Expenses incurred any time this year may qualify for the deduction, not just those since the Act was signed on October 4.
The deduction is available to eligible educators in public or private elementary or secondary schools. To be eligible, a person must work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide.
An educator may subtract up to $250 of qualified out-of-pocket expenses when figuring adjusted gross income (AGI). This deduction is available whether or not the taxpayer itemizes deductions on Schedule A.
The IRS suggests that educators keep records of qualifying expenses in a folder or envelope with a label such as “Educator Expense Deduction,” noting the date, amount and purpose of each purchase. This will help prevent a missed deduction at tax time.
For more information, call the IRS Tele-Tax system toll-free at 1-800-829-4477 and select Topic 458. Or go to the IRS Web site at www.irs.gov and use its search engine to find Tax Topic 458.