Tax

Tax Deductions for Educators

With the fall semester of the school year well underway teachers, administrators and aides should not forget to keep track of education-related expenses that could help reduce their taxes when they file their returns next spring. With that in mind, let’s take a look at three key work-related tax benefits that are available to educators.

Educators can take advantage of tax deductions for qualified expenses related to their profession. The costs many educators incur out-of-pocket include items such as classroom supplies, training and travel.

There are two methods educators can choose for deducting qualified expenses: Claiming the Educator Expense Deduction (up to $250) or, for those who itemize their deductions, claiming eligible work-related expenses as a miscellaneous deduction on Schedule A, Itemized Deductions.

A third key benefit enables many teachers and other educators to take advantage of various education tax benefits for their ongoing educational pursuits, especially the Lifetime Learning Credit or, in some instances depending on their circumstances, the American Opportunity Tax Credit.

Educator Expense Deduction

Educators can deduct up to $250 ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 each) of unreimbursed business expenses. The educator expense deduction is available even if an educator doesn’t itemize their deductions. To do so, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

Those who qualify can deduct costs like books, supplies, computer equipment and software, classroom equipment and supplementary materials used in the classroom. Expenses for participation in professional development courses are also deductible. Athletic supplies qualify if used for courses in health or physical education.

Itemizing Deductions using Schedule A

Often educators have qualifying classroom and professional development expenses that exceed the $250 limit. In that case, the IRS encourages them to claim these excess expenses as a miscellaneous deduction on Schedule A (Form 1040 or Form 1040NR). In addition, educators can claim other work-related expenses, such as the cost of subscriptions to professional journals, professional licenses, and union dues. Transportation expenses may also be deductible in situations such as, for example, where an educator assigned to teach at two different schools needs to drive from one school to the other on the same day.

Miscellaneous deductions of this kind are subject to a two-percent limit. This means that a taxpayer must subtract two percent of their adjusted gross income from the total qualifying miscellaneous deduction amount. For more information, see Publication 529, Miscellaneous Deductions or call the office for assistance.

Keeping Records

Educators should keep detailed records of qualifying expenses noting the date, amount, and purpose of each purchase. This will help prevent a missed deduction at tax time.

Taxpayers should also keep a copy of their tax return for at least three years. Copies of tax returns may be needed for many reasons. If applying for college financial aid, a tax transcript may be all that is needed. A tax transcript summarizes return information and includes adjusted gross income. Tax transcripts are available free of charge from the IRS.

The quickest way to get a copy of a tax transcript is to use the Get Transcript application on the IRS website. After verifying identity, taxpayers can view and print their transcript immediately online. The online application includes a robust identity verification process. Those who can’t pass the verification must request the transcript be mailed. This takes five to 10 days, so plan ahead and request the transcript early.

Questions about tax deductions for educators?

Don’t hesitate to call the office if you have any questions about tax deduction available to educators including teachers, administrators, and aides.

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Seasonal Workers and the Health Care Law

Businesses often need to hire workers on a seasonal or part-time basis. For example, some businesses may need seasonal help for holidays, harvest seasons, commercial fishing, or sporting events. Whether you are getting paid or paying someone else, questions often arise over whether these seasonal workers affect employers with regard to the Affordable Care Act (ACA).

For the purposes of the Affordable Care Act the size of an employer is determined by the number of employees. As such, employer-offered benefits, opportunities, and requirements are dependent upon your organization’s size and the applicable rules. For instance, if you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, you are an ALE (Applicable Large Employer) for the current calendar year.

If you hire seasonal or holiday workers, you should know how these employees are counted under the health care law:

Seasonal worker. A seasonal worker is generally defined for this purpose as an employee who performs labor or services on a seasonal basis, generally for not more than four months (or 120 days). Retail workers employed exclusively during holiday seasons, for example, are seasonal workers.

Seasonal employee. In contrast, a seasonal employee is an employee who is hired into a position for which the customary annual employment is six months or less, where the term “customary employment” refers to an employee who typically works each calendar year in approximately the same part of the year, such as summer or winter.

The terms seasonal worker and seasonal employee are both used in the employer shared responsibility provisions but in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an applicable large employer subject to the employer shared responsibility provisions; however, there is an exception for seasonal workers:

Exception: If your workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 during that period were seasonal workers, your organization is not considered an ALE.

For additional information on hiring seasonal workers and how it affects the employer shared responsibility provisions please call.

Solar Technology Tax Credits Available for 2017

Certain energy-efficient home improvements can cut your energy bills and save you money at tax time. While many of these tax credits expired at the end of 2016, tax credits for residential and non-business energy-efficient solar technologies do not expire until December 31, 2021. Here are some key facts that you should know about these tax credits:

Residential Energy Efficient Property Credit

  • This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
  • Qualified equipment includes solar hot water heaters and solar electric equipment placed into service on or after January 1, 2006, and on or before December 31, 2021.
  • There is no maximum credit for systems placed in service after 2008.
  • The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.
  • If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
  • At least half the energy used to heat the dwelling’s water must be from solar in order for the solar water-heating property expenditures to be eligible.
  • Solar water-heating equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
  • The home must be in the U.S. It does not have to be your main home.
  • Use Form 5695, Residential Energy Credits, to claim the credit.

Equipment costs such as assembling or installing original systems, on-site labor costs, and costs related to wiring or piping solar technology systems are considered final when the installation is complete. For a new home, the placed in service date is the occupancy date.

The maximum allowable credit varies by the type of technology:

Solar-electric property

  • 30% for systems placed in service by 12/31/2019
  • 26% for systems placed in service after 12/31/2019 and before 01/01/2021
  • 22% for systems placed in service after 12/31/2020 and before 01/01/2022

Solar water-heating property

  • 30% for systems placed in service by 12/31/2019
  • 26% for systems placed in service after 12/31/2019 and before 01/01/2021
  • 22% for systems placed in service after 12/31/2020 and before 01/01/2022

If you would like more information about this topic please contact the office today.

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