EDUCATORS
This provides an overview of the deductions that may be allowable to educators and those studying to become educators. While in most cases the IRS treats educators like other taxpayers, there are some distinct tax benefits extended to those in teaching.
Income
Income in the form of salary and wages to educators who are employed by any public or private educational institution, medical teaching facility or community school district is generally taxable and subject to Social Security and Medicare tax.
Other common non-salary earned income and compensation may be classified as self-employed income. This income is not only subject to income tax, but also may be subject to a 15.3% self employment tax. Withholdings are rarely taken out of this self-employed income and quarterly estimated taxes should be paid for federal, state and self employment tax obligations.
Examples of typical self-employed educator income are:
- Substitute teaching income when employed as an independent contractor
- Payments for research studies
- Payments for clinical studies
- Speaker fees
- Author royalties and fees for published materials
- Consulting fees
- Endorsement and sponsorship fees
Excludable Income
Some forms of compensation to educators may be excluded from income. They include:
- Meals, when it is for the convenience of the employer
- Lodging, if on campus and if accepting the lodging is a requirement of the job
- Faculty Housing on an educational or medical research campus, if adequate rental is charged and/or valued as compensation
- Scholarship and Fellowship Grants to candidates for a degree at a qualified institution
- Tuition Reductions extended to educational employees
- Athletic Scholarship Grants to candidates for a degree and participation in athletics
Caution: Payments to individuals who teach or conduct research as part of their degree curriculum are not excludable from gross income and may be taxed.
Tip: Tax laws are liberalized regarding employer-provided meals. If provided for the convenience of the employer, they are not only excludable from income for teachers, but 100% (formerly only 50%) deductible for the educational institution.
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