History

• Before 2003, teachers could claim work-related expenses, but only if they itemized their deduction. These out-of-pocket expenses would count as miscellaneous expenses, but the total itemized deductions in this category could not exceed 2 percent of adjusted gross income. In 2003, a new tax law revised the process for claiming tax deductible expenses for teachers and set a cap on the expenses teachers can deduct.
  
  

Deduction

• Qualified educators are eligible to deduct up to $250 of qualified education-related expenses as long as they are not otherwise reimbursed for the expenses. Deductible expenses include books, classroom supplies, computer equipment, software, computer services, supplementary materials and other equipment classroom equipment. Health and physical education teachers can only deduct expenses for supplies related to athletics.
  
  

Qualifying Teachers

• To qualify as a teacher for the Educators' Expense Deductions, an individual must have worked 900 hours in a school that provides elementary or secondary education, whether public or private, as these terms are defined by state law. These hours must have been worked as a teacher, instructor, counselor, principal or aide. Taxpayers who feel they fall into these categories are encouraged to save receipts for all expenses they plan to claim as deductions.
  
  

Reporting Deduction

• The $250 Educators' Expense Deduction can be claimed easily on Form 1040 or Form 1040A. On Form 1040, the amount of the deduction is entered on line 23, where it is ultimately deducted from gross income. Similarly, the deduction is reported on line 16 of Form 1040A. No further declarations are necessary, but receipts should be saved in case of audit.
  
  

Limits

• Three situations limit the ability of a qualifying teacher to claim qualifying deductions. If you made tax-free withdrawals from your Coverdell Education Savings Account, the amount of these withdrawals must be subtracted from your qualifying expenses. If expenses remain in excess of the withdrawal amount, these can be declared under the Educators' Expense Deduction. Similarly, qualifying expenses must be reduced by the amount of any distribution from a qualified tuition program that is not otherwise included as part of your gross income. Finally, if you paid certain qualified higher education expenses and used these payments to avoid reporting interest on qualified U.S. savings bonds, the amount of the unreported interest must be deducted from your qualifying expenses.