educator deduction- reimbursement?

[kathyc2]

Indiana recently passed legislation for educators to take a $100 credit for the first $100 of classroom supplies purchased. Quite a change since just a few years ago we had to add back the federal deduction to IN AGI.

Thoughts on if this is a "reimbursement" for federal deduction?

[ATSMAN]

Indiana recently passed legislation for educators to take a $100 credit for the first $100 of classroom supplies purchased. Quite a change since just a few years ago we had to add back the federal deduction to IN AGI.

Thoughts on if this is a "reimbursement" for federal deduction?

I hope it is not considered a "reimbursement" for Federal purpose.

Is this a refundable or non refundable state tax credit?

In MA we have a refundable tax credit on a portion of property taxes paid for seniors if they meet certain income threshold. It is not considered "income" for Federal purpose.

[kathyc2]

Non-refundable. Post probably wasn't clear, but federal deduction is for unreimbursed expense. Question is should the "reimbursement" from the state be handled the same as if school reimbursed expense?

[TAXNJ]

Benefit

Non-refundable. Post probably wasn't clear, but federal deduction is for unreimbursed expense. Question is should the "reimbursement" from the state be handled the same as if school reimbursed expense?

Think that if the deduction resulted in a tax benefit, one would need to claim the tax benefit. If not, maybe this is a new "loophole" in the code. But the answer should be easy to find.

[TAXNJ]

Atsman

I hope it is not considered a "reimbursement" for Federal purpose.

Is this a refundable or non refundable state tax credit?

In MA we have a refundable tax credit on a portion of property taxes paid for seniors if they meet certain income threshold. It is not considered "income" for Federal purpose.

If the refundable tax credit on a portion of property taxes paid for seniors if they meet certain income threshold resulted in a "tax benefit" by a tax deduction on their Federal return where they had taken the FULL amount as a property tax deduction (and resulted in a "tax benefit") and then received a "tax credit" , you might want to revisit that or am I missing something?

[Roland Slugg]

That Indiana tax credit is not a "reimbursement," per se, so it doesn't reduce the amount that can be taken on F-1040. However, if the woman itemizes her deductions on federal Schedule A, that Indiana credit will have the same effect, as it will lower her deduction for state income taxes paid on the following year's federal return. Teachers who take that credit but don't itemize on their federal returns will enjoy the benefit of any Indiana credit they receive, without incurring a partially offsetting payback on their federal returns the following year.

[TAXNJ]

Interesting

That Indiana tax credit is not a "reimbursement," per se, so it doesn't reduce the amount that can be taken on F-1040. However, if the woman itemizes her deductions on federal Schedule A, that Indiana credit will have the same effect, as it will lower her deduction for state income taxes paid on the following year's federal return. Teachers who take that credit but don't itemize on their federal returns will enjoy the benefit of any Indiana credit they receive, without incurring a partially offsetting payback on their federal returns the following year.

That is interesting. Are you saying only Indiana state return and not federal return for the education supplies deduction and credit? Are both the deduction and reimbursement occurring within the same year? If yes, would agree the net would apply.

So what is the treatment with that type of Indiana education deduction and then credit given in the following year for the prior year deduction? Is it treated differently than medical and R/E tax paid and than reimbursement the following year for the Indiana state return and not Federal?

Can you share the source you found?

My original post replies were addressing ATSMAN's post regarding R/E taxes and if teacher supplies deduction taken on federal return and reimbursement the following year and if there was a tax benefit resulting from the prior year deduction.

[kathyc2]

That Indiana tax credit is not a "reimbursement," per se, so it doesn't reduce the amount that can be taken on F-1040. However, if the woman itemizes her deductions on federal Schedule A, that Indiana credit will have the same effect, as it will lower her deduction for state income taxes paid on the following year's federal return. Teachers who take that credit but don't itemize on their federal returns will enjoy the benefit of any Indiana credit they receive, without incurring a partially offsetting payback on their federal returns the following year.

Duh, I didn't even think on the line of it effectively being added back for itemizers AGI, I was caught up w/ it being a potential "double dip". We're not talking high finance here but $20-30 tax savings is a decent bottle of wine.

[ATSMAN]

If the refundable tax credit on a portion of property taxes paid for seniors if they meet certain income threshold resulted in a "tax benefit" by a tax deduction on their Federal return where they had taken the FULL amount as a property tax deduction (and resulted in a "tax benefit") and then received a "tax credit" , you might want to revisit that or am I missing something?

The MA refundable tax credit is called "Senior Circuit Breaker". I recall from years back that the issue was raised if the "credit" is taxable income for federal purpose and it is not. It follows the same logic as the MA earned income credit. The income thresholds to qualify are very specific (social security, non taxable retirement etc.) all bump you above the threshold.

[TAXNJ]

Clearer if possible

The MA refundable tax credit is called "Senior Circuit Breaker". I recall from years back that the issue was raised if the "credit" is taxable income for federal purpose and it is not. It follows the same logic as the MA earned income credit. The income thresholds to qualify are very specific (social security, non taxable retirement etc.) all bump you above the threshold.

OK
The following is applicable to taxpayers who DEDUCTED (ITEMIZED) the full Real Estate Tax owed in that year and receives a rebate the following year.

1- Some states would offer a Real Estate Tax "Senior Freeze" and/or "Homestead rebate". At one point the state sent a CHECK in the current year (i.e., 2014 for the prior year (i.e., 2013) "Senior Freeze" and/or "Homestead rebate" amount. HOWEVER, the taxpayer, not knowing what and/or not receiving the "Senior Freeze" and/or "Homestead rebate" in prior year (2013), DEDUCTED (ITEMIZED) the full Real Estate Tax owed in that year 2013. THEN the state sends the taxpayer (in 2014) and says "here is your "Senior Freeze" and/or "Homestead rebate" for prior year (2013)", which resulted in a partial reimbursement of the prior year (2013) R/E tax of which the taxpayer had paid the FULL amount of R/E tax. Now some of the states are not sending the check BUT reducing a R/E quarterly amount in the current year for the "Senior Freeze" and/or "Homestead rebate" for the prior year (2013) thus resulting in a non tax issue.

2 - However, if the situation is different than mentioned in the last sentence in #1 above, it may be a "tax benefit" or "recovery" (need to re-calculate the prior year to see if the "Senior Freeze" and/or "Homestead rebate") resulted in a "tax benefit" when the taxpayer had DEDUCTED (ITEMIZED) the full Real Estate Tax owed in that year and receives a partial reimbursement for that year in the following year. Yes, if the taxpayer did not itemized the R/E tax - it is a non issue.


#2 is based on pub 530:
"Refund or rebate of real estate taxes. If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income.
Is this any clearer?

[kathyc2]

OK
The following is applicable to taxpayers who DEDUCTED (ITEMIZED) the full Real Estate Tax owed in that year and receives a rebate the following year.

1- Some states would offer a Real Estate Tax "Senior Freeze" and/or "Homestead rebate". At one point the state sent a CHECK in the current year (i.e., 2014 for the prior year (i.e., 2013) "Senior Freeze" and/or "Homestead rebate" amount. HOWEVER, the taxpayer, not knowing what and/or not receiving the "Senior Freeze" and/or "Homestead rebate" in prior year (2013), DEDUCTED (ITEMIZED) the full Real Estate Tax owed in that year 2013[/B]. THEN the state sends the taxpayer (in 2014) and says "here is your "Senior Freeze" and/or "Homestead rebate" for prior year (2013)", which resulted in a partial reimbursement of the prior year (2013) R/E tax of which the taxpayer had paid the FULL amount of R/E tax. Now some of the states are not sending the check BUT reducing a quarterly amount in the current year for the "Senior Freeze" and/or "Homestead rebate" for the prior year (2013) thus resulting in a non tax issue.

2 - However, if the situation is different than mentioned in the last sentence in #1 above, it may be a "tax benefit" or "recovery" (need to re-calculate the prior year to see if the "Senior Freeze" and/or "Homestead rebate") resulted in a "tax benefit" when the taxpayer had DEDUCTED (ITEMIZED) the full Real Estate Tax owed in that year and receives a partial reimbursement for that year in the following year. Yes, if the taxpayer did not itemized the R/E tax - it is a non issue.


#2 is based on pub 530:
"Refund or rebate of real estate taxes. If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income.
Is this any clearer?

I think the difference is in if TP receives a check from County, or whatever agency is responsible for RE tax, or if it is a credit on state tax return.

If credit on state tax return, it is already washing through. Say TP paid 5,000 in state tax and took that as itemized deduction. For simplicity on state tax return say the 5K paid was exactly the liability. Without a RE credit they would not have refund or balance due. But, they received 500 RE credit, meaning a 500 state refund which will be then be counting as income for federal in following year.

[TAXNJ]

State vs Federal

I think the difference is in if TP receives a check from County, or whatever agency is responsible for RE tax, or if it is a credit on state tax return.

If credit on state tax return, it is already washing through. Say TP paid 5,000 in state tax and took that as itemized deduction. For simplicity on state tax return say the 5K paid was exactly the liability. Without a RE credit they would not have refund or balance due. But, they received 500 RE credit, meaning a 500 state refund which will be then be counting as income for federal in following year.

You are talking state and I am talking federal.

Yes, some states do not consider the R/E rebate, or whatever one calls it, in the tax calculations therefore no tax benefit (recovery) issue if the R/E was an itemized deduction. However, on the federal level , if the R/E was an itemized deduction, see prior post and have a "happy July 4th".

[Snaggletooth]

Real World Again

We do this quite often - begin a thread with a state credit for teachers and end up talking about a rebate for real-estate taxes. The RE taxes probably deserves to be started as a separate thread. Of course, I have been taken to task for attempting to write rules for this forum and that is really a job I don't want.

Officially, the federal $250 adjustment is to allow an amount "up to $250" for classroom teachers who have to spend money out of their own pocket for supplies and other expenses related to the classroom. I almost never ask anymore, but I've never had a teacher tell me that their expenses were LESS then $250. And it seems like all teachers know about the deduction/adjustment. In fact, they believe it is automatic and they are not responsible for substantiating the deduction.

As a real world practice, they just don't, and practitioners never make an issue of it. And I can't imagine an auditor making an issue of $250 by asking to see receipts. I think they could if they wanted to.

I would treat the Indiana credit and the Federal credit as tax reductions, and not let the existence of one affect the other. Indiana gets the full credit off their state taxes and also get the full $250 as an adjustment for Federal.

[TAXNJ]

You are correct

We do this quite often - begin a thread with a state credit for teachers and end up talking about a rebate for real-estate taxes. The RE taxes probably deserves to be started as a separate thread. Of course, I have been taken to task for attempting to write rules for this forum and that is really a job I don't want.

Officially, the federal $250 adjustment is to allow an amount "up to $250" for classroom teachers who have to spend money out of their own pocket for supplies and other expenses related to the classroom. I almost never ask anymore, but I've never had a teacher tell me that their expenses were LESS then $250. And it seems like all teachers know about the deduction/adjustment. In fact, they believe it is automatic and they are not responsible for substantiating the deduction.

As a real world practice, they just don't, and practitioners never make an issue of it. And I can't imagine an auditor making an issue of $250 by asking to see receipts. I think they could if they wanted to.

I would treat the Indiana credit and the Federal credit as tax reductions, and not let the existence of one affect the other. Indiana gets the full credit off their state taxes and also get the full $250 as an adjustment for Federal.

You are 100% correct that the thread started with a state credit for teachers and end up talking about a rebate for real-estate taxes and probably deserves to be started as a separate thread.

For some reason, we did this not to break the TTB Forum rules that you have been taken to task for attempting to write rules for this forum. Rather should have paid attention to the original post and not respond to one of the reply post.

Probably if you post a separate thread of the forum rules you mention, in this classroom supplies topic, so not to get the topics mixed in one post it would be noticeable and helpful to all of us.

Again, good post as with many of your posts and have an enjoyable July 4th.