 Income Tax 2022-2023 Educator Expenses. Let's do some wealth preservation with some tax preparation. Most of this information comes from the Form 1040 Tax Year 2022 Instructions, Instructions for Schedule 1, Additional Income and Adjustments to Income, Adjustments to Income section which you can find at the IRS website irs.gov irs.gov looking at the income tax formula. We are now focused on the adjustments to income, remembering that the first half of the income tax formula is in essence an income statement although a strange one. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it where we have income minus the equivalent of the expenses being the deductions getting us down to the bottom line the equivalent of net income this being the taxable income remembering that our objective is upside down that is we want the taxable income as low as possible as opposed to in a normal situation where we want the net income as high as possible so in prior sections we looked at the income line we would like to have income of course but we would like it to be exempt for taxes so we can have the taxable income in our formula as low as possible when we're looking at the adjustments to income it can be a little bit confusing because in essence these are thought of or you can think of them as deductions even though we can name it adjustments to income because we're decreasing getting down to another subtotal of adjusted gross income and then we're going to deduct the standard deductions or the itemized deductions to get down to the taxable income now one of the reasons you might call it adjustments to income instead of like a deduction some form of deduction is because it's leading to that subtotal of adjusted gross income and that subtotal is usually the number as opposed to the top income number used to do phaseouts when we have phaseouts of deductions or phaseouts of credits as people's income goes up they phase out the benefits you might get for certain credits and certain deductions and they usually base that on some format of the adjusted gross income instead of the top line of income however you might also hear the adjustments to income be called the above the line deductions or you might hear them call schedule one deductions the name could change as time passes we now have a schedule one which we didn't have before so if that sticks around for a while they might be called you know you might refer to them as like the schedule one deductions but the point is they are different from the itemized or standard deductions that are on down below now just from the deductions that most people kind of come to mind most people think about think about it think about it Jimmy the first deductions people usually think about are like itemized deductions meaning the home mortgage interest the property taxes the charitable deductions which are generally the itemized deductions which you would only take if they were greater than the standard deduction the standard deduction being dependent upon filing status principally we'll talk more about itemized deductions later the adjustments to income or the above the line or schedule one deductions are are good in the sense that if you have those deductions or if you're capable of taking those deductions you don't have that same limitation you don't have the limitation of needing to clear the standard deduction before you start getting the benefits from the above the line deductions the adjustments to income one of the primary examples would be like an ira deduction that's the one that probably comes to mind most often for the adjustments to income now also just remember that when we're thinking about deductions in general that they are different from the credits on down below which is an important distinction if you got one dollar of deduction versus one dollar of a credit you would rather have the dollar credit because that's going to have a greater impact a dollar for dollar decrease in the tax that you would owe or an increase in the refunds you would get whereas a decrease in the form of a deduction is just going to decrease the taxable income the amount of actual benefit you get from that tax will then be dependent upon the tax rates the progressive tax system that is being applied and apply to that dollar although it gets more complex than that because oftentimes the credits have income phaseouts and whatnot so it gets kind of messy in terms of well what if my credit gets phased out my deduction doesn't get as phased out and so on and so forth so that's the general idea let's take a look at some of the items and the adjustments to income there's usually less of them than some other formats of deductions and credits so let's look at those lying 10 on the form 1040 adjustments to income notice is coming from schedule one now here's the schedule one additional income and adjustments to income this is part two and we're looking here at the educator expenses now first let's remember that the normal and natural types of deductions we would expect to have in an income tax type of systems are those deductions that were necessary in order to generate the revenue in other words it would be natural for us to say well if you had to expand this money to generate the revenue then we might tax you on the net income as opposed to the gross income a concept we can see clearly when we're looking at the schedule C where we have in essence another income statement for the business income minus the deductions which are expenses in essence getting us to the net income we don't see that as clearly on many tax returns that just have w2 income because we don't have all those expenses because we assume that those are incurred by the employer in that situation so i point that out to note the contrast in other kinds of deductions which kind of have a political nature to them or the government is trying to nudge us or incentivize us change our behavior in some way when you look at the educator expenses you're talking about a certain group of people that work in a certain industry that typically get w2 wages but we have this educator expense credit designed specifically for them and that happened quite some time ago and it might be like the power of the unions kind of at work and whatnot although you might say well that's still pretty small credit at this point and that's in part because it is an older credit so this is something that was put in place a long time ago and it just kind of hung on there although it's not been increased automatically all the time for inflation and therefore the dollar amount has look more and more relatively low compared to what it prior was for example or to normal people's income at this point in time so if people qualify for a qualified educator usually you're thinking someone that's working as a teacher in like K through 12 for example then you would assume that they would generally get this credit so it's something you just kind of basically be aware of you're saying what what occupation do they have if they're a teacher then you're thinking they're probably going to have this credit obviously they need the information to backup the fact that they spent this money in work in order to to satisfy an audit of this of this number but usually you would think if someone qualifies as an instructor and they're a full-time teacher they probably do spend you know 300 dollars in order to a year in order to to facilitate the classroom and there's a very low cap on it there so in other industries obviously you might think well i do other stuff that's like important i'm a nurse or something or something like that i should get to deduct some of the stuff that i bring into my patients to make their room i mean i'm bringing stuff for the room and stuff people spend money on their work but again it was something that was specially designed in part you've got to think because the teachers unions you know kind of push that through so it is what it is so we got that special kind of thing for the for the educator expense so line 11 educator expenses if you were an eligible educator in 2022 you can deduct online 11 up to 300 dollars a qualified expenses you paid in 2022 so again the dollar amount is relatively low it hasn't changed too much over time because it hasn't had an automatic increase with inflation so so so but it still kind of has stuck around this whole time it's it's kind of an interesting thing so if you and your spouse are filing jointly and both of you were eligible educators the maximum deduction is $600 which makes sense you got two teachers in that case however neither spouse can deduct more than 300 dollars or the other qualified expenses on line 11 an eligible educator is a kidney garden through grade 12 teacher instructor counselor principal or aide who worked in a school for at least 900 hours during a school year qualified expenses include ordinary and necessary expenses paid so that's kind of the general rule that you would normally expect unlike a schedule c type of business in a natural kind of uh deductibility component if i had to expend something in order to generate the revenue i should be able to deduct that so that you tax me on the net income as opposed to the gross income however if you're a w2 employee most people don't get any of those deductions at this point in time because it's assumed that as an employee your employer is taking care of that situation obviously industries are different in terms of how much the the employer is taking care of it and when you're taking care of people like like nurses and teachers and whatnot uh i'm sure a lot you know a lot personal money could clearly be spent that would that would that would go out of people's pockets but that's true for a lot of professions as well so in any case for professional development courses you have taken related to the curriculum you teach or to the students you teach or in connection with book supplies equipment including computer equipment software and services and other materials used in the classroom so obviously you would want the backup to support this and the event of an audit and whatnot but you would think that most teachers if they qualify would would possibly have those expenses and therefore you should be able to you know assume you should be able to take the deduction generally if someone is a qualified teacher you would think so an ordinary expense is one that is common and accepted in your educational field a necessary expense is one that is helpful and appropriate for your profession as an educator an expense doesn't have to be required to be considered necessary tip qualified expenses include amounts paid or incurred in 2022 for personal protective equipment uh disinfectant and other supplies used for prevention of the spread of coronavirus so it was kind of funny during this whole time of you know the coronavirus wasn't funny but during that time I thought it was kind of funny that they kind of advertised the fact that they've expanded the definition of qualified expenses so people can take this $300 expense credit to include you know sanitary supplies and whatnot that you might have paid for in the classroom as if they needed that to reach the $300 like they didn't increase the threshold they just said you know you know I think most teachers already hit the threshold you know they didn't really do anything so I thought that was kind of funny but anyways qualified expenses don't include expenses for homeschooling or for uh non athletic supplies for courses in health or physical education you must reduce your qualified expenses by the following amounts uh excludable us series ee and i savings bond interest from form 8 8 1 5 non-taxable qualified tuition program earnings or distributions any non-taxable distribution of coverdale education saving account earnings and any reimburse uh you received for these expenses that weren't reported to you in box one of your form w2 so for more information on those uh use tax topic 458 or c publication 529