New Rules for Educator Expenses Under OB3: What Teachers & Coaches Need To Know

What is OB3?

The One Big Beautiful Bill Act (OB3), enacted in Public Law 119‑21 on July 4, 2025, rewrites the familiar “teacher deduction.” Beginning with the 2026 return, educators will have a split deduction that combines the long‑standing $300 above‑the‑line benefit with a brand‑new, unlimited itemized write‑off. Below is a guide to how the rules worked before OB3, how they work now, and the action steps every educator should take.

Key Terms To Know

Above‑the‑Line Deduction:

A write‑off taken on Schedule 1 that lowers Adjusted Gross Income (AGI). You can claim it even if you take the standard deduction.

Itemized Deduction:

A write‑off claimed on Schedule A that reduces taxable income only if you forgo the standard deduction.

Standard Deduction:

A fixed amount that most taxpayers subtract from AGI instead of itemizing. For 2026 the amounts are expected to be $15,750 (single) and $31,500 (MFJ).

MFJ:

Married Filing Jointly. Two eligible spouses can each claim the $300 above‑the‑line deduction.

Educator Expenses Under Prior Law (2022 through 2025)

·       Since 2022, eligible K-12 educators (teachers, counselors, aides, etc.) could deduct up to $250 in unreimbursed classroom costs as an above-the-line-deduction, even if using the standard deduction.

·       In 2022, the cap increased to $300, indexed for inflation, and remains in effect through 2025.

OB3’s Key Change for Educators – Effective 2026

Starting in tax year 2026, OB3:

Step 1: First $300 ($600 MFJ) — still claimed above the line on Schedule 1, just as before.

Step 2: Any additional qualified expenses — now deductible on Schedule A with no dollar limit, but only if you itemize.

Expanded eligibility. Interscholastic sports coaches and sports administrators who meet the same 900‑hour rule are now “eligible educators.”

Who Qualifies as an “Eligible Educator”?

You must work at least 900 hours during the school year in a K-12 school (public or private) as a:

·       Teacher

·       Instructor

·       Counselor

·       Principal

·       Aide

New under OB3 (2026 onward):

·        Interscholastic sports coaches and sports administrators who meet the same 900-hour rule also qualify.

What Qualifies as Educator Expenses?

Eligible educator expenses are defined as unreimbursed trade or business expenses that meet the IRS criteria for being ordinary and necessary under IRC §162 for your role as an educator.  Specifically:

Eligible expenses include:

·       Books, supplies, and other classroom materials

·       Equipment, including computers, software, and related services

·       Professional development courses or training related to the curriculum or student instruction

These expenses must be:

·       Directly related to your work as an eligible educator

·       Not reimbursed by your school, district, or other employer

Before VS After OB3: Key Differences

Key Rule	Before OB3 (2022 – 2025)	After OB3 (2026 +)
Deduction for first $300 ($600 MFJ)	Above‑the‑line on Schedule 1	Still above‑the‑line on Schedule 1
Deduction for expenses over $300	Not deductible	Unlimited, but only as an itemized deduction on Schedule A
Standard‑deduction filers	Keep full $300/$600 benefit	Keep $300/$600; lose any excess unless they itemize
Overall cap on qualifying expenses	$300 per educator	No dollar cap on Schedule A portion

As an example, Teacher Taylor spends $1,200 on supplies in 2026. Taylor files single and normally claims the standard deduction. Taylor deducts the first $300 above the line. The remaining $900 is deductible only if Taylor’s total itemized deductions (mortgage interest, SALT, charity, plus $900) exceed the $15,750 standard deduction for 2026. Otherwise, the $900 provides no benefit.

What Should Educators do to Track Expenses?

1.     Track your expenses throughout the year – keep receipts, invoices, and records.

2.     Plan a head for 2026: If your educator expenses plus mortgage interest, property taxes, and other deductions exceed the standard deduction, itemizing may be worthwhile.

3.     Talk to a tax professional if you’re unsure whether to itemize.

Conclusion

OB3 finally lifts the dollar cap on educator expenses—but only teachers, coaches, and staff who itemize will capture the new benefit. Start tracking now so you can crunch the numbers and choose the best strategy when you file your 2026 return. If you need help navigating OB3’s new rules, contact Parks Tax & Consulting PLLC for expert guidance tailored to your classroom and your wallet.

Bottom line: Keep your receipts, plan a head, and consider your itemization strategy for 2026.

This post may not contain a complete analysis of the tax issues discussed herein and does not represent official conclusions or advice regarding the matter.