Tax Tips for Teachers

With teachers headed back to school, we thought that it might be a good time to share some teacher-specific tax tips:

As an educator (defined as: teachers, counselors, principals, or aides who work at least 900 hours during a school year)  in the K-12 capacity, you can automatically deduct up to $250 that you spend for your classrooms with no limitation on your Federal return.

In addition, you can take a $100 credit on your Indiana return.

Of course, your need to actually spend your own money and have receipts to back it up in order to get this or any deduction.

If you spend quite a bit more than $250 for your classroom, then your might get an additional deduction if your itemize your tax return.  What is “quite a bit”?  “Quite a bit” is generally $1,000 to $2,000 depending on your situation and the income of your family.  That seems like alot of money, but once you consider that work-related mileage (at 54 cents/mile) and the work-related percentage of your cell phone bills count, then you might be closer than you think.  Keep track of all of your mileage related to purchasing supplies, going to an after-school activity that is away from your school, driving to a student’s home, etc.  The only miles that don’t count are the miles related to commuting back and forth from your home to your school.

Coaching a sport or leading an after-school activity can also create deductions.  You should track your mileage to and from the  location where the activities are held (…if the activities are not held at the same school where you regularly teach) as well as any equipment or supplies that you purchase for the activity.

Once you get to the end of the year, add up all of those miles and receipts and see where you stand.  You might get some benefit from all of that recordkeeping!

An extra $70,000 from Social Security

Currently, a worker gets a “full” Social Security retirement benefit at age 66.  They can start collecting at age 62 and receive 75% of their full monthly benefit each month or wait until age 70 and get about 132% of their full monthly benefit each month.

About half of Americans start collecting Social Security benefits as soon as they are allowed to at age 62.  Their decision to collect “early” is usually based to their need to access the funds to meet living needs.

For those Americans that don’t “need the money” to survive, there are several seldom-discussed planning strategies available.  They are easy enough to implement once you figure out which strategy is the right one.

Want an example?  Husband and wife are the same age and retire at the same time.  Reflexively, they both start collecting Social Security benefits at age 66 because “that is when they are supposed to”.  If they had put some thought into it, they would have learned that they could pull $70,000 more out of social security in their lifetimes if wife would have started to collect at age 62, husband would have collected a spousal benefit from age 66 to age 70, and then collect his full benefit at age 70.  They actually start to get money at age 62 and end up getting more than if they would have waited until age 66…wonderful!

Wonderful, but complicated.  Fortunately, we do this everyday and  can look at a couple’s earnings, age, and expected longetivity, calculate 14 different scenarios and let you know which one makes the most sense for you.  Usually the standard answer of waiting until age 66 to collect is not the best one for you.

Are you or your parents approaching 60 years of age…now is the time to talk.