Teaching takes a toll on many educators' pocketbooks as they routinely buy supplies for their financially strapped schools. Now there's a tax break for such academic dedication.

Teachers and other educators can deduct up to $250 that they spend each year to buy classroom supplies.

Even better, the deduction is claimed directly on Form 1040, meaning there's no need to itemize to get the break. Rather, it's an adjustment to your income, helping cut your tax bill by reducing your overall income. The less income to tax, the lower the tax bill.

There is a bit of a complication on 2006 returns, though. The educators' expenses deduction actually expired at the end of 2005 and Congress didn't get around to reenacting it until late last December. That meant tax forms were printed without this being included.

Don't worry. You can still claim the money you spent to help enhance your students' classroom experiences. It will just take a bit more tax homework on your part.

Unfortunately for teachers and their tax-break eligible colleagues, lawmakers did not increase the deduction amount when they renewed the provision. It's still just $250, a relatively small amount. But more school employees should now be able to claim at least a portion of their class-related expenditures. In the past, these costs could be claimed only if they were included as miscellaneous itemized deductions on Schedule A. Even then, the expenses were useless unless they and all other allowable costs totaled at least 2 percent of the filer's adjusted gross income.

Who can claim costs?
The deduction is not limited to teachers. The Internal Revenue Service says you can take the deduction if, for the tax year, you were employed at a state-approved public or private school system and held one of a number of positions.

Who can take the deduction?

• Teachers • Instructors • Counselors • Principals • Aides

Your position can be with any class from kindergarten through grade 12 as long as you work at least 900 hours during the school year.

Couples who share education careers could get a double break if they file jointly. However, each spouse is limited to $250 of qualified expenses. That means if you spent $350 on school supplies and your husband spend $150 on his classroom, you can only deduct $400 on your return even though your combined education expenses were $500.

What about home schooling? Sorry, but the tax law specifically states that costs for this type of instruction don't count toward the educator-expenses deduction.

What items are deductible?
As for exactly what you can deduct, the guidelines are pretty broad. You can count unreimbursed costs for books, supplies, computer equipment (including software and services) and other equipment and supplementary materials used in the classroom.

The IRS also applies its "ordinary and necessary" rule here. To be considered ordinary, an item purchased for your classroom must be something that is common and accepted in the education profession. A necessary expense is one that is helpful and appropriate, but it doesn't have to be required to be considered necessary.

So buying a videotaped production of "Death of a Salesman" to help drive home Arthur Miller's points to your students would likely meet tax muster. But purchasing a new television upon which to watch it instead of using your school's working-but-old Zenith may raise some IRS eyebrows.

Circumstances could limit expenses
In addition to the eligibility requirements, the IRS also has set some limits on the money spent on school supplies. Most notable is the restriction that could affect teachers who are continuing their own educations.

The IRS says when an educator uses any tax-favored funds to pay for his or her own schooling, those amounts must be subtracted from the total the teacher claims under the new deduction.

Take for example Joe Jones, a high school English teacher who is working toward his master's degree in literature during school breaks. He cashed in savings bonds to pay his tuition and excluded the bonds' $150 interest from tax. He also spent $200 for books on Shakespeare to distribute to his 11th-grade students. He must subtract the $150 in tax-free interest from the $200 for the books, leaving him only $50 to claim under the educator's expense deduction.

The same rule applies to nontaxable earnings a teacher gets from qualified state tuition programs or tax-free withdrawals from a Coverdell education savings account.

Coordinating classroom claims
The educator expenses deduction is definitely great for taxpayers who don't itemize. But claiming it won't prevent you from taking other eligible itemized deductions on Schedule A.

If you're a teacher who usually itemizes to save on taxes, such as deducting home mortgage interest and property taxes, keep doing that. In fact, if you spent more than $250 on your class, take another look at the miscellaneous deductions line on Schedule A to see if you can use the excess to also claim this itemized tax break.

Just remember to take the educator expenses deduction on your 1040 form, too. For example, if you spend $500 on classroom supplies, claim half of it directly on your 1040 as an educators' expenses deduction. Then add the other half to your potential miscellaneous itemized deduction amount. It might be just enough to allow you to take that tax break, too.

A new tax-claim lesson
Now about taking the deduction directly on your 1040. Here's where last year's delay in reauthorizing this tax break complicates claims.

To claim classroom expenses, enter the amount on line 23 of Form 1040, which is officially designated for claiming an Archer medical savings account deduction, and write "E" on the dotted line. This will let the IRS know you're using it for the educators' expenses adjustment. If you also claim contributions to an Archer MSA, then enter the combined amount of both adjustments, write "B" on the dotted line and attach a statement showing the amounts allocated for each.

The IRS has provided an example of what a correct educators' expenses annotation looks like on its Web site.

If you claimed these expenses last year on 1040A, you'll have to use the long Form 1040 this filing season. Since the tax break didn't make it onto forms, the IRS decided to limit the annotated claims to just one form in order to streamline the makeshift process.

The good news, though, is that the educators' adjustment was approved for 2007, too. So the IRS has plenty of time to get the adjustment back on the forms for next filing season.