The Senate and House of Representatives had different proposals for the 2018 tax reform bill, but just what does the new tax legislation mean for teachers?
There was a lot of public debate about the tax reform bill, but the final, signed version has some substantial differences than what was initially proposed. Here are some of the key takeaways for teachers as they begin thinking about the tax reform’s impact on their 2018 income and refund.
Even though the House proposed elimination of the $250 tax deduction teachers were able to take for classroom supplies and job-related expenses, and the Senate proposal doubled it to $500, the final tax reform bill signed kept the deduction at $250. That means those trips to the dollar store can still be deducted.
If your school district or other education employer is paying your continuing education tuition, you don’t have to report the tuition paid as taxable income if the amount is less than $5,250 per year and meets other conditions set by Congress.
If you plan to buy an electric car in 2018 to drive to school, you can probably still get the tax credit of $7,500 if you purchase one of the plug-in vehicles that qualify for this deduction. If you ride your bike to school, you can no longer deduct expenses related to your bicycle commuting.
Are you taking a new teaching position in another state and selling your home? The new tax reform bill allows, with some exceptions, a single person to exclude up to $250,000 in capital gains on the sale of a home if you have lived there for two of the last five years. Married couples can exclude up to $500,000 in capital gains. Speaking of that new home, the new tax bill permits taxpayers to deduct up to $10,000 for total costs of property taxes and local and state income taxes. If your state has no income tax, you can take the deduction for property taxes and sales tax up to $10,000. This is a change from the current law which allowed all property taxes and state and local income tax to be deducted. Another change is the new tax reform bill does not permit you to deduct home equity loan interest.
Child Tax Credit
Do you have children of your own? Congress increased the child tax credit to $2,000 for each child. If you need cash quickly, this tax reform allows that up to $1,400 of that credit can be paid as a refund — you can get this amount back from the IRS even if you don’t have any tax liability.
If you are still paying off your student loans, there is good news in the 2018 tax reform. You may still deduct student loan interest as the House proposal to repeal the deduction failed.
Teachers and other employees of educational institutions who, as a benefit of their employment get a waiver or reduced tuition for themselves or their dependents, are still able to receive that benefit and not be taxed on the amount as income. The new tax reform bill did not adopt the House’s proposal to tax this benefit.
You might want to consider completing your own tax return for 2018, as the new tax reform bill has eliminated the deduction for fees paid to your accountant or tax preparation agent, as well as the cost of tax preparation software and electronic tax return filing fees.
Your 2017 federal income tax return must be filed by April 17, 2018, but the effects of the 2018 tax reform on America’s teachers won’t be felt until they file their 2018 taxes in April of 2019.