Ep. 133 | Beyond the Blackboard: Teachers & Taxes
Download MP3Hey, everyone, and welcome back to the Teaching Tax Flow podcast episode 133 today. We are diving into teachers and taxes. So before we do that, as always, let's take a brief moment and thank our episode sponsor.
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John Tripolsky:Hey, everybody. Welcome back to the podcast today. As you heard in the intro, we're gonna talk about teachers and taxes. So two t's, not exactly the two t's that you know from teaching tax flow, but they still count. So without further ado, Chris Pacquero, welcome back, sir.
John Tripolsky:How are doing?
Chris Picciurro, CPA:I'm doing great, John. How are you doing?
John Tripolsky:I'm doing good, man. I'm doing good. Obviously, Easter was a little bit ago, so that another holiday is behind us. And as anybody knows with a toddler, holidays tend to turn into a bigger ordeal sometimes than they have to be, so I'm doing alright. We're doing good.
Chris Picciurro, CPA:Oh, I can't I this might sound awful to say. I cannot tell you how happy I am that we don't have any toddlers. Love the ages the kids are now. Enjoyed each of the each of those seasons. But, yeah, definitely different for us, but enjoy it.
Chris Picciurro, CPA:But it gets easier. You know? It it's, I know I had a had a, discussion with with my wife about, sometimes I'm called a curmudgeon, but I just it's you know, part of this is that it doesn't matter if you're if you're a Christian, you celebrate Easter, you celebrate other holidays, you know, but I I sometimes get frustrated. And I'm gonna sound like an old, again, an old curmudgeon here. Right?
Chris Picciurro, CPA:But, just I I hope that the spirit of the holiday doesn't get masked by characters, baskets, elves on the shelves, munches on the ledges, you know, all of that stuff. I I just that's as I get a little older, I realize that there is, what we are celebrating is very, very important, and and sometimes, you know, our society, just kinda makes things I don't know. We we get away from from what's important, almost like a baseball or a football game, John. You know, a tailgate party's fun or the halftime show's fun. Right?
Chris Picciurro, CPA:But we're all there to watch a football game, aren't we? If there was no football game, there'd be no no one's gonna just go to a random parking lot and barbecue and play games if there's no game to go to watch. The band's not gonna go on the field during halftime and draw get the crowd excited if there's no game to watch. So that's my little soapbox.
John Tripolsky:Hey. You know what? It is it is almost like taxes. Right? Like, some people think like, oh, well, I will put it off.
John Tripolsky:You know, it's something else or the perception of things change. And, I mean, this topic specifically, right, we're looking at teachers as a profession Yes. And taxes. So, like, why why are we here? Why why do these two obviously, we know what they have to do with each other.
John Tripolsky:But how is this different than really anybody else? Say, a plumber, a car mechanic, a executive, etcetera. So how how does this situation play out a little bit different?
Chris Picciurro, CPA:John, maybe we could do an episode on mechanics and money one day.
John Tripolsky:Oh, that'd be a good one.
Chris Picciurro, CPA:Okay. How to fix
John Tripolsky:your beep up.
Chris Picciurro, CPA:So Few things. Nice. Nice. Few things that we know. One of the laws of teaching tax flow is that tax agencies are our involuntary business partner, meaning tax laws are written to encourage and discourage certain behavior.
Chris Picciurro, CPA:There are some rules within our tax code that give some teachers some well deserved benefits, a couple different deductions they get that that the average worker or or a worker in a different industry does not does not receive, and they darn it, they deserve it. Now, this one is near and dear to my heart also, because my wife is a teacher. Now she just moved into a new role as a school council this year, but spent a good, good portion of the last twenty years as a as a public school teacher, specifically special ed. And and, you know, John, you know, a lot of times in our we are very fortunate to be able to to be a beacon really for tax planning and strategy, to be a the voice of tax planning and strategy. That's what teaching tax flow is.
Chris Picciurro, CPA:But to do presentations not only to taxpayers, but also many many, many other tax professional organizations. The point is, and and you're intimately involved in that, you make all of the content look amazing and the and the slide decks look great. But we always talk about how tax planning and strategy is really for everybody. You know? And I feel like the lower to moderate income households are the ones that need it the most even though the majority of tax planning and strategy, if you look out there in the marketplace, is geared towards the the higher asset, higher income households.
Chris Picciurro, CPA:In a lot of our case studies, John, we always use a teacher because teachers are well known, especially early on in their career, for really working so hard. I could tell you that that teaching goes well, well beyond that time in the classroom. It's it's really a vocation. And and in the beginning of their careers, they're not paid as well as they are at at the end of the career, and that makes sense. Right?
Chris Picciurro, CPA:Most most professions, your your pay increases with the amount of experience that you have. Mhmm. So when we think about teachers and taxes, I thought, gosh. Not only is my wife a teacher, but I would bet anyone listening to this anyone listening to this has a teacher in their life that impacted their life. Even if they weren't a straight a student, even if they didn't really love going to school.
Chris Picciurro, CPA:Not all of my three children actually love go being a student, but all of them have had teachers that have impacted them. Myself, personally, I've had teachers that have impacted me. And, so if you're listening to this, first of all, thank you. Second of all, tag your tag a teacher. Share this with the teacher.
Chris Picciurro, CPA:Show the appreciation you have for them. And, even if they're retired, man, they'd get a kick out of that. So so definitely do that. John, do you remember your favorite teacher growing up?
John Tripolsky:I don't know if I had a favorite, but I have a lot that are memorable. You know, some unfortunately, some of them, it's the things that they decided to do after I was no longer a student that landed them in somewhere besides a a classroom. Let's put it that way without going into any detail. But, yeah, there's a there's a handful of them. Right?
John Tripolsky:I mean, it's and I and you know what? Now that I think about it, yeah, no favorites, but definitely ones that kinda instilled the something I'm thinking of trying to cross a couple on mirror. They really just kind of help drive, like, a train of thought. Right? Like, way that you think about things.
John Tripolsky:And really, most of them were when I was younger, not so much in my older times. I guess I got more stubborn as it went along, maybe.
Chris Picciurro, CPA:Well, yeah, my favorite teacher ever was my first grade teacher. So, anyway, let's talk about teachers and taxes, because there are some there are some special rules for teachers. And, also, when thinking about this episode, I thought, man, there's some things that teachers could really benefit from that they're not really aware of. You know, we already know that personal finance tax is not taught as much as it should be. There's a effort right now to make accounting a part of STEM and and making it more mainstream in the educational world.
Chris Picciurro, CPA:But as of right now, many teachers are super smart at doing teaching kids different things, but really don't know much about finance and taxes. So let's dive into it. And we've identified four or five different things that teachers should be aware of here. So so let's let's and, honestly, if you are a teacher, I'll this is my last soapbox. I mean, I'm not gonna promise this is my last jump on the soapbox.
Chris Picciurro, CPA:Think about what we are. Ultimately, we are the voice of tax planning, but we named this company Teaching Tax Flow for a reason. We believe in empowering and educating taxpayers to legally and ethically reduce the tax they pay in their lifetime. If you you know, learning is a lifetime activity, and I hope it is. John, you I you know, I learn all the time.
Chris Picciurro, CPA:You learn all the time. We as people that you we're always learning different things with this podcast, different activities. I mean, every time we go to an event, we we have so many takeaways. We might learn a new app. We might learn a better way to do things.
Chris Picciurro, CPA:So learning is a is a lifetime activity, and and that formation of learning has started with teachers. Ready to dive in?
John Tripolsky:Let's do it, man. Let's do it. Alright.
Chris Picciurro, CPA:Alright. Bell
John Tripolsky:has rung. You know what? I'm gonna add a little school bell. Right
Chris Picciurro, CPA:Right here.
John Tripolsky:Oh. Let's do it.
Chris Picciurro, CPA:Say bye. How about oh. Rand, before we jump in, who is your favorite Saved By The Bell character, John?
John Tripolsky:Oh, man. I don't
Chris Picciurro, CPA:know if it was Saved By The Bell is and you're listening, first of all, congratulations that you're so young and you are interested in finance. Second of all, go ask your parents.
John Tripolsky:Looks like having a Tamagotchi. Somebody brought that up at, I think, a church yesterday, and I'm like, oh, yeah. Know what that is. You know what? I can't remember oh, Kelly Kapowski.
John Tripolsky:Yeah, That was her full name, man.
Chris Picciurro, CPA:She was she's my favorite also, strictly for educational reasons, John.
John Tripolsky:Of course. That was
Chris Picciurro, CPA:the only reason. Right?
John Tripolsky:Absolutely. Absolutely.
Chris Picciurro, CPA:Oh, hey. You know what? We don't have the similar taste in in in some things, John, but we do have a similar taste in our favorite Saved by the Bell character.
John Tripolsky:Absolute you know what? There we go, buddy. We'll get matching t shirts one day. This will work this will work.
Chris Picciurro, CPA:Kelly Kapowski fan club.
John Tripolsky:There you go. There'll be a party of two. So wherever we are, they'll publicly say that. So we're good.
Chris Picciurro, CPA:Alright. Well, we'll transition to mister Belding. Right? He wasn't even the principal. I guess he Yep.
Chris Picciurro, CPA:Might have some of these deductions. So first one, first thing when you're talking about teachers and taxes is there is a federal tax deduction. Now in the 2024 tax year, it's $300. It's up to $600 if you're married and both are teachers. You might say, that's kinda weird.
Chris Picciurro, CPA:I have to tell you in doing in being in the tax world for many, many, many years, it is very common that teachers actually marry each other. And it makes sense. Right? Because they might have met, you know, in high school or in college, and they or maybe they were met, like, right you know, in those younger years, formational years or early in their career. So if you have two this three it's up to a $300 deduction for your out of pocket classroom expenses.
Chris Picciurro, CPA:These are things that are like supplies, books. It could be software, something that someone's using in their classroom. Now I could promise you, as a husband of a teacher, and my wife does like to shop. Right? We know this.
Chris Picciurro, CPA:Anyone who listens to podcast knows that. You know, I I gave her grief that, we didn't have an Amazon delivery one day, and the driver stopped by to see if she was okay. But but for for those that that do buy things for the classroom, which is pretty much every teacher, you can deduct up to $300 in on on your 2024 return. Usually, that gets indexed for inflation. $600 of both spouses are teachers.
Chris Picciurro, CPA:Now that's not a big, big amount, but that's a nice little tax deduction. Because, typically, if you're an employee somewhere with the Tax Cuts and Jobs Act, 99.9% of the time, you cannot deduct your what are called unreimbursed employee business expenses or what we used to call twenty one zero six expenses. So if you're a teacher, definitely take advantage of that out of pocket classroom expense deduction. Again, that deduction is above the line. What does above the line mean?
Chris Picciurro, CPA:It means that it's calculated before we determine your AGI. Now we have an acronym. So I wonder if John made up his his jingle yet. I don't know. I hope so by the time this goes out.
Chris Picciurro, CPA:A, adjusted gross income. Even if you don't itemize your deductions, you and take the standard deduction, you can deduct these out of pocket classroom expenses. Couple other things to consider. Some states allow for these this deduction, most of them that have a tax. And then some states offer additional deductions like California and New York.
Chris Picciurro, CPA:So some of those higher tax states that usually we kinda throw under the bus, typically, they're gonna actually give you maybe a little extra deduction for those out of pocket classroom expenses. So teachers, you deserve it. I think this amount should be higher, but guess what? You have one little nugget for yourself. The next one.
Chris Picciurro, CPA:Oh, by the way, you know, it's funny because we real story here. We my my youngest loves a in a creature called axel, an axolotl. John, you've gotten to know these axolotls by visiting, historic Franklin. And, we kind of felt we found out that axolotls don't like to be alone, so we got a second axolotl for the house. Well, you don't know the gender of these creatures.
Chris Picciurro, CPA:They live in water. They're kinda like a salamander until, like, six to eight weeks into their life or some I don't remember the exact one. Let's just put it this Down the road, we had a lot of baby axolotls, John. Lot of baby lot of eggs. So what happened was my wife gave one of the one of the offspring to the science teacher at her school.
Chris Picciurro, CPA:Then the science teacher went and bought a tank and bought food, and the the axolotl lives in the science room. So for something like that you know when you get those silly questions like, hey. Can my pet food be a deduction? Well, guess what? If you're a science teacher and you have a salamander living in your classroom that the kids are tracking and using as part of your con educational content, absolutely, I feel that's a out of pocket classroom expense deduction.
John Tripolsky:Was I was wondering where you were gonna go with that with the axolotl story. But, hey. It's a good good turn around there.
Chris Picciurro, CPA:Well, you know, John
John Tripolsky:Impressive.
Chris Picciurro, CPA:You know, pretty much the answer for every in every tax question, it's situationally dependent. Right? Now for the axolotls that live at our house, I'm not comfortable deducting the expenses for them because they really are pets. And my wife's the school counselor now. But but for the for the science teacher that has the offspring Absolutely.
Chris Picciurro, CPA:Alright.
John Tripolsky:Let's just say that you consulted with them previously to recording this, you know, and then they they get a fee, right, for food.
Chris Picciurro, CPA:Well, lucky for us, we we're way over that $300 threshold for out of pocket expenses every year, and we would not need that axolotl expense. Alright. Number two, student loan interest deduction. Now we have, we have talked about student loan interest on this podcast previously. We understand that there are income phase outs, based on, your filing status and that AGI, again, adjusted gross income.
Chris Picciurro, CPA:Many teachers, especially early on in their career, do incur student loan debt, and they start paying on that student loan, debt, you know, early in their career. Now some of them defer it, and there's a bunch of other strategies with that. But the point is up to $2,500 per year of your student loan interest can be deductible. So that's pretty good. Yeah.
Chris Picciurro, CPA:And that is, again, a deduction that is very, very common for teachers. So make sure you're taking the student loan interest deduction if you are eligible.
John Tripolsky:And, actually, Chris, if I can add to this really quick, and I'll make this very brief.
Chris Picciurro, CPA:Not. Because I've been talking
John Tripolsky:a lot today. I had a very interesting question that somebody asked me the other day, and I felt smart because, obviously, I knew the answer. But it it was interesting that they asked this. They basically said that and I don't know what their their personal finance or I don't think it's supposed to a business. But they said they had a student loan.
John Tripolsky:It was either a student loan or a business loan. And it sounded to me like they hadn't made payments in a while on it. And they said, well, I still have interest occurring. I said, well, you can't write off interest, you know, accumulative over a period of time. It's interest paid.
John Tripolsky:Right? Just to make that clear for everyone.
Chris Picciurro, CPA:Where did John get a statement that
John Tripolsky:says that? But
Chris Picciurro, CPA:Breaking out tax tax tips.
John Tripolsky:Small. Small. I felt comfortable with that one because I knew that answer. So
Chris Picciurro, CPA:But that's actually a good point. I'm proud of you. Yeah. I'm real proud of you. It's real nice here.
Chris Picciurro, CPA:That yeah.
John Tripolsky:People must think I know more than I do if they're out there, you know, they're stopping asking me these questions. It's it's good.
Chris Picciurro, CPA:You know? Well, you know, you we know you get recognized in public quite often, by the way. So, you know but
John Tripolsky:It's the beer. Yes.
Chris Picciurro, CPA:You have to pay the student loan interest. If it just accrues, it's not deductible yet. My third out of five nuggets for this podcast, many teachers go back like my wife did and and pursue a master's degree for many reasons. Career advancement, additional pay, you wanna just like the education aspect of it. But even after you've you're past those first four years of college, you could still be eligible for the lifetime learning credit.
Chris Picciurro, CPA:That's up to a $2,000 credit per year, and tuition and fees qualify. Now books don't qualify unless they're required, and then there are some income limits and eligibility requirements. And, again, you remember you, you know, if your employer is paying for your education, for higher education, then you can't double dip there. But, again, very, very common that we see with teachers that they are pursuing a master's degree, or even a PhD or doctoral degree, and they're still eligible for the LLC, not the LLC that usually gets me fired up. Limited liability company.
Chris Picciurro, CPA:Many people call it limited liability corporation. Yes. We hear you. We don't like that. You're on Santa's bad list.
Chris Picciurro, CPA:Speaking of speaking of holidays, but the LLC, lifetime of learning credit. So number four. Number four out of five. Big mistake. And, John, you know this a lot from our, from our, case studies.
Chris Picciurro, CPA:How many times does a do a teacher start a new job right out of college? They're making a very modest income. They're probably in the 12% marginal tax bracket. They set up with their employer the first day. They know they should be putting away into retirement.
Chris Picciurro, CPA:They're excited about it. They check that box and put the money into a four zero three b program or something tax deferred instead of doing the Roth? Well, if you're a teacher, especially in your early years, I can't encourage you enough to consider putting money into a Roth four zero three b four fifty seven plan or I or or a Roth IRA instead of the traditional. Getting a 12% tax benefit today, but then having to pay tax on that money way down in the future just doesn't make sense. So please deeply consider putting money in your Roth account, not a tax deferred account.
Chris Picciurro, CPA:And and many school districts allow this within their plan. Now, typically, the school district or the school is going to match you in into that tax deferred portion of the account, but you could put money into the tax after tax portion. So, John, I know we have a lot of content on Roths in general, but Roths versus traditional tax deferred versus tax free, etcetera, etcetera.
John Tripolsky:Absolutely. Absolutely. And that's and that's a great one too. Mean and as you mentioned there too, Chris, it's we have a lot of content on this stuff. So, yeah, if anybody who's listening or watching this, just search everything that we have.
John Tripolsky:YouTube is a great a great tool for that, but then also, you know, podcasts, we have tons of stuff.
Chris Picciurro, CPA:You are correct. Number five. I always say the HSA. Hey. The HSA, I just didn't give it enough credit in the first fifteen years to twenty years of my career, sadly, just because I thought it wasn't a huge deduction.
Chris Picciurro, CPA:Shame on me. Shame on me. The HSA is your equivalent of a late bloomer. It is really the best of both worlds. You get a deduction when you put the money into a health savings account.
Chris Picciurro, CPA:Oh, another acronym. I forgot, John. Hopefully, you got that that jingle going. And the money grows tax free, and you can use it for medical expenses down the road and potentially roll it into a Roth down the road as, you know, as well. So many, many teachers are eligible for a health savings account.
Chris Picciurro, CPA:Please deeply consider it. Many teachers in their younger years are very, very healthy and might say, I don't have medical expenses. Why do I need to do this? Contribute. Make sure you get your employer match.
Chris Picciurro, CPA:Let that grow tax free for you because at some point, you will have medical expenses, and down the road, it could be for yourself, a spouse, or a dependent. And guess what? If you end up not having it, you can use the money later anyway. So please, we like to call HSAs, quote unquote, Stealth retirement accounts. Back to mechanic.
Chris Picciurro, CPA:Remember the Stealth? Wasn't that a Dodge vehicle back in the day? Sporty?
John Tripolsky:Yes. Dodge. Twin turbo all wheel drive, if I remember I
Chris Picciurro, CPA:just put one right in Johnny t's wheel box there. He doesn't
John Tripolsky:know. Was either that or the Talon. One of the two. But I think it's just yeah. Man.
John Tripolsky:From the same era as Saved by the Bell, by the way.
Chris Picciurro, CPA:I know. We're going old school today. So health savings account. So let's wrap them up. Five things.
Chris Picciurro, CPA:Out of pocket classroom expenses, student loan interest deduction, educational credits, educational credits, which is a lifetime learning credit, Roth contributions, and health savings account contributions. If you're a teacher, know a teacher, love a teacher, married a teacher, share this with them. Be a friend and share it with a friend.
John Tripolsky:Awesome. Awesome. Great run through on those, Chris. I know, you know, just getting into this, some people again might have been really confused. They're like, teaching teaching tax flow.
John Tripolsky:Teachers he had a lot of the the the teach out there. But really, when it all comes down to it too, yes, this obviously applies. This content built around teachers, but there's a lot of other things, a lot of industries, professions, individuals, families, etcetera, that a lot of the same stuff applies to. So check it out. But as always too, we'll give the little disclaimer.
John Tripolsky:Actually, Chris, I'll let you I'll let you give the disclaimer. Who should they talk to if they have, you know, tax questions specifically?
Chris Picciurro, CPA:Obviously, they're gonna wanna talk to their financial adviser and tax professional. Okay? That's number one. If you don't have someone like that, it's very, very simple. First step, jumping into feedingtaxes.com.
Chris Picciurro, CPA:There's no cost to it. That's our private Facebook group. We have over 2,000 people in there. We we are very particular about making sure that you are not spammed. It is a collaborative effort.
Chris Picciurro, CPA:Number two, go to the teaching tax flow hub. It's another free resource. You could submit an inquiry to our team within one business day. We're gonna reach out. It could be anything from, I'm looking I need help with a financial adviser.
Chris Picciurro, CPA:I'm looking I I I have questions about estate planning. I'm I'm more considering long term care. Anything finance and tax related, we work tire tirelessly to make sure that we help you legally and ethically reduce the tax you pay in your lifetime and reduce your stress because stress is expensive. That's what you should do, Absolutely.
John Tripolsky:Absolutely. And definitely check out the hub as Chris mentioned. Anything related what we can help you with, that is the best place to do it. The one thing that we will not give you any advice on particularly is Chris is not gonna recommend a good hairstylist to you. So don't, don't bother putting in that, that submission to it.
John Tripolsky:But yeah, check it out. Let us know how we can help you guys. And as always here on the Teaching Taxable podcast, we will see you next week. Different day. Actually, same day, different date.
John Tripolsky:Maybe I'll change that a little bit. Same day, different date, completely different topic. Have a great week everybody.
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