The IRS has provided a safe harbor for eligible educators for COVID-19 protective items. Unreimbursed expenses paid or incurred after March 12, 2020, qualify for the educator expense deduction.
While this is exciting news for your clients, several questions might come to mind, including:
- Who is an eligible educator?
- What is a school?
- What is included as a protective item?
- How much can be claimed?
- Where is the deduction claimed?
Who is an eligible educator?
For this deduction, an eligible educator is an individual who works in a school for at least 900 hours during the school year and who is a kindergarten through grade 12 (K-12):
- Principal, or
As we see, the definition applies to school year, not calendar year, but the deduction is allowed for the tax year, which is generally a calendar year). School years usually span two calendar years, so if you have a client (eligible educator) who qualifies for a single school year, the client will be eligible for the deduction for two calendar tax years.
Cole, a calendar-year taxpayer, works as a full-time teacher in the Carver Public School District. The Carver Public School District has a 40-week school year, which includes the time period September 2019 to December 2019 (year one) and January 2020 to May 2020 (year two). Cole works 40 hours per week, or 1,600 hours (40 hours per week x 40 weeks) during the school year. Cole meets the definition of an eligible educator in year one and year two.
If a taxpayer is a substitute or part time educator (or someone who took a sabbatical or leave of absence for part of a school year), they may not be eligible for the deduction if they work less than 900 hours during the school year.
Sylvia is a substitute teacher in the Carver Public School District and works two, eight-hour shifts each week. For the school year, Sylvia works 640 hours (16 hours per week x 40 weeks). Sylvia does not qualify as an eligible educator, as her 640 hours during the school year are less than the required 900. However, if Sylvia worked three, eight-hour shifts each week, she would work 960 hours (24 hours per week x 40 weeks) during the school year and would qualify.
As practitioners, we need to ask questions of our clients. We cannot assume because someone is a teacher they automatically qualify for the deduction. If, in our example, Cole took a semester off, he would not qualify as and eligible educator because he would not have worked the 900 hours needed to qualify.
What is a school?
For the educator out-of- pocket expenses, a school is any school, public or private, that provided elementary education and secondary education as determined under state law. Expenses for home schooling do not qualify (See Publ. 529).
Ana, a calendar-year taxpayer, is employed full-time as an architect. She is paid as an employee for the services she provides to her employer and is considered a virtual employee, meaning she works from home. Due to COVID-19, the Calhoun County School District, where Ana’s second grade child attends school, was closed and Ana’s child attended school remotely. Ana assisted her child with Zoom meetings and other various tasks required as a remote student. The child had difficulty adapting to the remote environment and, as a result, Ana spent time instructing her child in the evening and on weekends.
Ana also spent money on face masks, disinfectant and other supplies related to her child’s remote education. Even though Ana spent time instructing or aiding her child, she would not meet the definition of an eligible educator and the home environment would not be considered a school. Ana is not an eligible educator and would not be allowed a deduction for the cost of the items she purchased.
What’s included as a protective item?
Eligible educators can deduct unreimbursed expenses for COVID-19 protective items to stop the spread of COVID-19 in the classroom. COVID-19 protective items include, but are not limited to:
- Face masks
- Disinfectant for use against COVID-19
- Hand soap
- Hand sanitizer
- Disposable gloves
- Tape, paint, or chalk to guide social distancing
- Physical barriers (for example, clear plexiglass)
- Air purifiers
- Other items recommended by the Centers for Disease Control and Prevention (CDC) to be used for the prevention of the spread of COVID-19
As a side note, the personal protective equipment and supplies used for the prevention of the spread of COVID-19 are part of the unreimbursed expenses an eligible educator can deduct as an above-the-line deduction. An eligible educator is allowed an above-the-line deduction for otherwise allowable trade or business expenses paid by them [§62(a)(2)(D)(i) and (ii)]:
- By reason of their participation in professional development courses related to the curriculum in which they provide instruction or related to the students for which they provide instruction, and
- In connection with books, supplies (expenses for nonathletic supplies for courses of instruction in health or physical education do not qualify), computer equipment (including related software and services) and other equipment, and supplementary materials used by them in the classroom (typically, ordinary and necessary expenses)
An ordinary expense is one that is common and accepted in the educational field. A necessary expense is one that is helpful and appropriate for the profession as an educator. An expense doesn’t have to be required to be considered necessary.
How much can be claimed?
The deduction cannot exceed $250 of qualifying expenses for tax year 2020. If a taxpayer is filing as married filing joint and both spouses are eligible educators, the deduction increases to $500, but not more than $250 per spouse.
The deduction is capped for inflation and for tax years beginning in 2021, the deduction remains at $250 (see Rev. Proc. 2020-45). Expenses in excess of the limit are miscellaneous itemized deductions and are therefore disallowed in tax years 2018-2025.
If an educator is in a formal relationship that is not a marriage under state law (for example a registered domestic partnership), and only one partner is an eligible educator, only the eligible educator partner can claim the deduction. In community property states, if the eligible educator uses community funds to pay educator expenses, the eligible partner may determine the deduction as if the eligible partner made the entire expenditure.
The deduction is available if an educator itemizes or does not itemize.
Where is the deduction claimed?
The deduction is claimed on Schedule 1 (Form 1040 or Form 1040-SR), Line 10. Educators should save their receipts and note the date, amount and purpose of each purchase.
Can I see an example?
Back to our example with Cole. If Cole spends $600 on face masks, hand sanitizer, paper and other supplies for use by the students in his classroom, Cole can only take an above-the-line deduction for $250 of the $600. The remaining $350 is considered an unreimbursed employee business expense, nondeductible for tax year 2020.
In some cases, the educator may be reimbursed for qualified expenses. In the event an educator is reimbursed and the qualified expenses were not reported as compensation in Box 1 of the educators Form W-2, Wage and Tax Statement, the qualified expenses must be reduced by any reimbursements received for those expenses.
If Cole submitted and received a $600 reimbursement for the items he purchased (not reported in Box 1 of his W-2), Cole would not be eligible for a deduction as his out-of-pocket cost is $0.
Because of COVID-19, more items are included as qualifying expenses for an eligible educator. As practitioners, we need to ask the appropriate questions to make sure educator clients are receiving all the deductions they are entitled to. Because circumstances change, we cannot assume same as last year.
For more information on the IRS safe harbor, see News Release IR 2021-28.