Congress, recognizing that most classroom teachers spend a significant amount of their own money on classroom supplies, granted them a special deduction of $250 (indexed for inflation after 2015) as an adjustment to gross income – referred to as an above-the-line deduction – rather than an itemized deduction.
Eligible educators are those who work in a school as teachers of kindergarten through grade 12, instructors, counselors, principals, or aides for at least 900 hours during a school year. Because of the hours requirement, many substitute teachers will not qualify for this above-the-line deduction. Many conscientious teachers spend far more than this $250 deduction for classroom supplies every year.
What are the options for teachers who spend more than $250 on classroom supplies or for teachers and other qualified individuals who do not meet the 900-hour test or other requirements to deduct the $250 above-the-line? When eligible, teachers should always claim the above-the-line deduction first; then, they should consider the following for the excess. This advice may also help their ineligible colleagues.
Employee Business Expense – One option is to claim classroom supplies beyond the $250 deduction as employee business expenses on Form 2106. However, employee business expenses are tier 2 miscellaneous itemized deductions, so the expenses might get wiped out or substantially limited by the required reduction equal to 2% of AGI. If the taxpayer is subject to the AMT, employee business expenses are not allowed at all. Caution: Employee business expenses must be a condition of employment verified in writing by the employer; this may be difficult to obtain.
Charitable Contribution – Another option would be to claim the expenses as a charitable contribution.
Code Sec. 170(c)(1))For the purposes of this section, the term “charitable contribution” means a contribution or gift to or for the use of a State, a possession of the United States, or any political subdivision of any of the foregoing, or the United States or the District of Columbia, but only if the contribution or gift is made for exclusively public purposes.
Since public schools are part of a political subdivision of a state, any contribution, whether cash or goods, to the school would be a charitable contribution.
Therefore, a teacher’s classroom supplies, if the teacher properly documents them and the school provides a written acknowledgment, would qualify as a noncash charitable contribution. Caution: Supplies or equipment that the teacher retains would not be considered a completed gift, and their cost would not qualify as a charitable contribution. For example, if a science teacher purchases a microscope that students use in the classroom but keeps it for personal use when the school year ends, the cost of the microscope would not be deductible as a charitable contribution.
To meet the requirements for noncash contributions, the teacher claiming a contribution to the school must obtain and keep an acknowledgment from the school; the contents of this acknowledgement are based upon the value of the contribution claimed, as detailed below. The acknowledgment must be in the taxpayer’s possession before filing the return for the year the contribution was made or before the due date, including extensions, for filing that return—whichever is earlier.
- Deductions of Less Than $250 – These deductions must include:
- the name of the charitable organization,
- the date and location of the charitable contribution, and
- a reasonably detailed description of the property.
- the name of the charitable organization,
- the date and location of the charitable contribution,
- a reasonably detailed description (but not necessarily the value) of any property contributed, and
- whether the qualified organization gave the taxpayer any goods or services as a result of the contribution (other than certain token items and membership benefits).
- Deductions of at Least $250 but Not More Than $500– These deductions must include:
If goods and/or services were provided to the taxpayer, the acknowledgement must also include a description and good-faith estimate of their value.
- Deductions Over $500 but Not Over $5,000 – A taxpayer claiming a deduction over $500 but not over $5,000 for a noncash charitable contribution must have the same acknowledgement and written records as for the contributions of at least $250 but not more than $500 described above. In addition, the records must include:
- how the property was obtained (for example, by purchase, gift, bequest, inheritance, or exchange);
- the approximate date the property was obtained or (if created, produced, or manufactured by the taxpayer) substantially completed; and
- the cost or other basis, and any adjustments to that basis, of property held for less than 12 months and, if available, the cost or other basis of property held for 12 months or more.
- Deductions Over $5,000 – There are additional requirements for noncash contributions of this size, including certified appraisals. However, the details are not included here.