This is just one of the many deductions identified by Sandersen Knox & Company that may fail to be renewed and fall off of the fiscal cliff for 2012. In this case, teachers are the losers.
If Renewed – Here is how it has worked. As of now it has gone off the fiscal cliff.
Qualifications: You are a teacher, aide, instructor, counselor, or principal, and worked in a school at least 900 hours during the school year. Only grade school and high school educators qualify (K through 12th grade). A “school” includes any school which provides elementary education or secondary education (kindergarten through 12th grade), as determined under state law.
Background: School teachers often pay for classroom materials out of their own pockets. If you qualify as an “eligible educator,” you will be allowed a “classroom expense deduction” of up to $250 for expenses you paid in 2011 in connection with books, certain supplies, computer equipment (including related software and services), other equipment, and supplementary materials you use in the classroom. (Additional requirements, discussed further below, must also be satisfied.)
The Mechanics: The classroom expense deduction is allowed whether or not you itemize deductions. Without this special break, you could get a deduction only if you itemized, by treating the expenses as unreimbursed employee business expenses. However, unreimbursed expenses are among the “miscellaneous itemized deductions” that are deductible only to the extent your total “miscellaneous itemized deductions” exceed 2% of your adjusted gross income (AGI). (The 2%-of-AGI limit means that a teacher earning, say, $45,000, would get no deduction unless total miscellaneous itemized deductions exceed $900.)
To be deductible—under both the classroom expense deduction rule and the unreimbursed employee business expense rule—expenses must be “ordinary and necessary expenses” that you pay in connection with doing your job as a teacher. This means that the expenses must be customary and usual for teachers in your type of school located in your area, and must be appropriate or helpful (but not necessarily essential) to doing your job properly. In other words, if you’re a public elementary school teacher, and if it’s not out of the ordinary for public elementary school teachers in your area to buy books, supplies and materials for their classes, and if the things you actually buy are useful and helpful in performing your job as a teacher, the expenses pass this “ordinary and necessary” test.
In addition, the expenses must not be reimbursable. This means that if you have a right or expectation of reimbursement from your employer for these expenses, you can’t deduct them.
For example, say that you’re a qualified 2nd grade teacher. You spend $200 on chalk, crayons, paints, paper and various other supplies for use by your pupils in the classroom. You can’t get reimbursed by your school, and many public elementary school teachers in your area pay for these types of supplies for their pupils out of their own pockets. You’re entitled to deduct that $200 under the classroom expense deduction rule. If you spent $400 instead of $200, you could deduct $250 of the $400 under the classroom expense deduction rule. But the remaining $150 could only be deducted as an unreimbursed employee business expense. And note that if you took your pupils to a local museum and spent $56 in the museum cafeteria for snacks for them, you couldn’t deduct the $56 under the classroom expense deduction rule, because you spent that money for an activity outside the classroom, rather than for classroom books, supplies or materials.
Backing it up. In order to claim a deduction for classroom expenses—either under the classroom expense deduction rule or the unreimbursed employee business expense rule—you must be able to prove that you paid the expenses, when you paid them, and what the expenses were for. Receipts for the items purchased showing the date and amount of the purchase, and identifying the specific items purchased, will usually do the trick. A note on the receipt (or in some “classroom expense” log) indicating the classroom activities for which the items will be used is also helpful. Make these notes (or keep up the log entries) at or near the time you make the purchase. If your purchase includes both items you’re buying for your classroom and items for your (or your family’s) personal use, you should identify the classroom items on the receipt. And if the classroom items can be used for both classroom and personal purposes—for example, children’s books when you yourself have children, or general purpose computer software—you should be able to prove that you bought those items for classroom use. Photographs of the items in the classroom would be helpful in this regard.
There is one other little known requirement that may limit the amounts otherwise deducted. Whether or not this is retained for 2012 is yet to be determined.
Stay informed !
Are you taking advantage of all the tax breaks available to you? It pays to stay informed.