Tag Archives: Educator Expense Deduction

Congress releases final tax bill

The U.S. House and Senate have finalized a conference tax bill that is expected to be voted on by each body over the course of next week. After the individual chambers passed their own bills pertaining to reforming provisions of the current tax code, a conference committee was appointed to work out the differences in the bills. The final bill must now receive the support of both chambers and the signature of the president before it becomes law.

ATPE wrote members of the Texas delegation last week to urge members of the conference committee and leaders in both chambers to stand with teachers on two issues: maintaining a credit for educators who spend personal money on classroom supplies and omitting a potential new tax on investments of public employee pensions like the Teacher Retirement System (TRS) of Texas. ATPE is pleased to report that the final bill reflects our requests on both issues.

The educator expense deduction was maintained at up to $250 a year, giving educators who use money from their own paychecks a nominal but meaningful credit for at least a portion of what is spent to give all students and classrooms access to needed supplies. The House bill originally scrapped the deduction altogether, while the Senate bill doubled the max deduction to as much as $500.

The Unrelated Business Income Tax (UBIT), as it related to public pensions, was ultimately scrapped under the final bill. The House bill would have applied the tax to public pension investments, including the TRS trust fund, which could have weakened its financial soundness by subjecting it to new additional tax liability. The Senate’s bill did not apply the new tax to public pension investments.

Another issue that garnered significant attention was a provision termed to be one aimed at “school choice” and was included in varying forms under both bills. The Senate’s provision on the topic was added in the final hours of debate by Senator Ted Cruz (R-TX). The final bill includes a negotiated version of the provision, which expands spending eligibility for 529 college savings accounts. If the bill becomes law, parents will be able to use the money they’ve saved in a 529 account to pay for up to $10,000 a year in K-12 education expenses, including at private schools.

ATPE appreciates the conference committee’s final decision on both the educator expense deduction and the UBIT. We also appreciate the help of legislators and leaders who advocated on behalf educators. High-profile provisions of the final plan include a reduction of the corporate tax rate from 35 to 21 percent, a smaller top tax rate for individuals (at 37 percent instead of just under 40), omission of the Obamacare-era tax fine for those who don’t buy health insurance, and a cap on the deduction of state and local taxes (SALT) at $10,000.

ATPE weighs in as Congress hashes out differences on tax bill

Over the weekend, the U.S. Senate passed a $1.5 trillion tax bill designed by the upper chamber’s Republican leaders. The measure passed largely on a party line vote, with just one Republican joining Democrats in opposition, and it comes after the U.S. House passed its own version of a bill to reform the tax code last month. Now, the Senate and House must reconcile their respective differences and develop a bill that can pass both chambers before it heads to President Trump for his signature.

ATPE Governmental Relations Director Jennifer Canaday wrote members of the Texas Congressional delegation to weigh in on two provisions in the House and Senate bills that affect educators and their classrooms. The first pertains to the educator expense deduction, which currently allows educators to deduct up to $250 dollars from their tax bills when personal money is spent on classroom supplies and materials. The bill passed by the House eliminates the deduction altogether, while the Senate’s bill increases the deduction to up to $500.

ATPE Governmental Relations Director Jennifer Canaday

“While not the ideal approach to filling budget shortfalls or equalizing access to supplies and materials among students,” Canaday writes, “the deduction offers some form of reimbursement to educators who dip into their own pockets to purchase materials for students, classrooms, and schools that might otherwise go without.”

The second issue ATPE highlighted in its letter to Texas members of Congress involves the Teacher Retirement System of Texas (TRS). The House tax bill would apply a new tax, the Unrelated Business Income Tax (UBIT), to public pension investments, including the TRS trust fund.

“Weakening the financial soundness of the TRS trust fund by subjecting it to new additional tax liability on the front end, in addition to the taxes already paid by individual retirees, is a cost that neither the State of Texas nor the teachers who spent their working years serving our state can afford,” wrote Canaday.

In both instances, ATPE asks members of the Texas delegation to encourage House and Senate leaders and other members of Congress currently negotiating a final bill to retain the Senate approach: doubling the Educator Expense Deduction (or, at a minimum, maintaining the current $250 deduction) and forgoing the inclusion of language applying the UBIT to public pension investments.

Read the full letter here, and check back for more as the U.S. Congress continues its work to reform elements of current U.S. tax law.