Congress recently passed a new law that allows teachers to deduct up to $250 on their tax returns each year for classroom supplies that they pay for with their own personal money. This sounds good, but there is an even better way to get a tax savings for the supplies most teachers purchase.

The rule for classroom supplies used to be that they were treated as employee business expenses. For almost all teachers this meant little or no deduction each year. In the 1990s, some teachers took IRS to Tax Court and won. They argued that the money they spent on school supplies was really a charitable donation to the school district, or private school. Since school districts and private schools are qualified charitable organizations, these expenses should be treated as charitable donations. That makes them deductible in full for anyone who itemizes.

Surprisingly enough, event though the IRS lost, they have not acquiessed, which means they will not admit they lost. IRS has stated that they will continue enforcing the rules as they always were.

I disagree with IRS. The arguments made by the taxpayers were sound and reasonable. IRS lost. They should admit this. I have been deducting teacher supplies as charitable donations for the last two years and will continue to do so. I believe IRS will never take this to court again because they know they will lose. It sounds like the recent change in the law to allow a $250 deduction is their way of giving in without admitting they lost.

In conclusion, if you itemize you should treat these expenses as a charitable donation with no limit. If you do not itemize, the new law will allow you to deduct up to $250 as an "above the line" deduction.

Please keep good records on your expenses. At tax time, you can decide which is the best way to deduct them.

As always, feel free to call me or send me an email if you have specific questions.