Like all tax-paying individuals in the US, educators, including teachers, private tutors and principals, must file their tax returns. April 15 is a well-known deadline across the country, both anticipated and dreaded. The Internal Revenue Service (IRS) sets income thresholds to determine if a person must file a tax return, which varies based on age, marital status, and income. Despite the strict legal rules, several strategies exist to save money on taxes. In this blog, we’ll explore the tax responsibilities of teachers and provide insights into how they can manage their tax obligations effectively.
Do Teachers Owe Taxes?
Yes, like all employees, teachers owe taxes on their earnings. Regardless of location, every US citizen must file for tax returns focusing on their US-sourced income. Teachers’ salaries are subject to income tax and must be reported to tax authorities. At the same time, they are also eligible for various deductions or credits, including those for educational expenses and classroom supplies.
However, the specifics vary by state and different income categories and professional expenses. Therefore, teachers must stay informed about their tax obligations and seek advice from tax professionals if needed to ensure compliance and optimize their tax situation.
What Makes Teacher Income Taxable?
Like other US workers, teachers must also fulfill their obligations to pay federal income taxes. The process begins with receiving a W-2 form annually, which helps calculate their annual earnings and the taxes withheld from their wages. These earnings include their base salary and supplementary income from other activities like tutoring.
Tax Deductions For Teachers
However, educators enjoy an array of tax deductions and exemptions. Class supplies and professional development-based expenses are the most common tax deductions. This is closely followed by the special tax deduction called the Educator Expense Deduction, which allows teachers up to $250 in deductions. However, in such cases, it is always advisable for teachers to consult tax consultants and experts before filing tax returns.
Credits For Teachers
The system offers several ways for teachers to reduce their taxes. The Educator Expense Deduction is the best approach. You can also file your taxes through Beem, which is relatively easy. However, this special tax deduction comprises numerous nuances.
Let us break it down for you, but for that, it is important to understand who is eligible for the tax deduction.
A teacher who spends money on qualified education expenses and works for a minimum of 900 hours in a K-12 school certified by the State is eligible for the deduction. While the maximum deduction is $300, if two married teachers file jointly, they are eligible for a $600 deduction ($300 each).
Items Considered For Tax Deduction
Almost every academic supply, such as books, pens, computer apparatus and athletic equipment, is eligible for the same if it has not yet been reimbursed. Teachers can also be eligible for deducting costs for home office use if they are regularly and exclusively using the space for teaching, along with teaching-related internet and phone expenses. The IRS provides a specific deduction for up to $300 of unreimbursed expenses or $600 for married teachers filing jointly. It is crucial to keep an accurate record of all the expenses and consult the IRS guidelines to maximize these deductions.
Tax Withholding and Estimated Tax Payments
Regarding income tax filings and returns, the rules differ for tutors employed under an entity and self-employed tutors. While in the case of the former, your employer is responsible for reporting and withholding 30% of the gross US-source FDAP payments, but in the case of the latter, it can get a bit tricky.
Self-employed tutors fall under the IRS’s 1099 independent contractor category, making them the sole individuals responsible for filing tax returns. However, they can also, in some instances, collect and submit 1099-MISC forms from their consumers who are business agencies and from whom they have acquired $600 and above annually.
Additional Tax Situations for Educators
The spread of the pandemic has led to a booming increase in virtual classes. However, that has had a limited impact on the tax deductions. But, if you are a resident of Alabama, Pennsylvania, Arkansas, Hawaii, California, Minnesota, or New York, you can apply for a deduction based on the state’s tax return policies. These are available only under the Miscellaneous Itemized Deductions after you exceed the Standard Deduction limit. However, that only applies if you have a dedicated workspace for conducting your tutoring business.
How to Save Taxes As an Educator?
If you are an educator (teacher, counselor, instructor, principal, or aide for kindergarten students till 12th grade), you are lucky save a few extra bucks on your taxes. While getting married to another educator does help in the deduction, it may not be possible for everyone. So fret not as we take you through the process.
To save taxes, the first and foremost thing to do is maintain records of all your expenses related to your job. Focus on keeping a separate folder, hard copy, soft copy, or both. Highlight crucial areas so they are easier to find, and don’t delay recording the expenses.
If you are a self-employed tutor, you are luckier than you thought. Either through in-person or distance/virtual learning, if you provide academic assistance to US students, you can claim more deductions. Most significantly, if you earn less than $400, you may not be required to file for income tax, but if you do earn more than $400, it is mandatory to pay estimated taxes. However, there are still ways to evade paying the whole sum. Some of the factors here include
Workspace: It is important to build a dedicated workspace ( a small office corner furnished with a computer, table, etc.) to help. That will play a crucial role in helping you claim a part of your mortgage, rent, or even maintenance.
Transport expenses: This is another common saving method as it calculates the distance covered for your work. As of 2023, the US Government pays between 65.5 and 67 cents per mile.
Healthcare insurance and retirement plans: Akin to a double-edged sword, these approaches help you in the short and long run by providing more tax deduction facilities and privileges for health emergency and retirement support.
Advertising and supplies are considered for deductions helping you save some big bucks.
Conclusion
Teachers owe taxes on their income, just like other employees. In the US, teachers’ salaries are subject to federal, state and local taxes in compliance with IRS tax regulations. However, teachers can benefit from certain deductions and credits, such as those for classroom supplies and professional development. Considering these tax obligations and benefits, it is crucial to report your taxes accurately to manage your finances effectively. If required, seek professional tax advice to ensure compliance and optimize your tax situation. Consider using Beem to file your taxes to get the maximum refund. You can also use the free Beem Tax Calculator to get an estimate of your tax situation.
