Blog · 14 October 2026

Educator Expense Deduction After the Graham Act: Early Childhood Educators, the $350 Cap and What US CPA Firms Should Tell Clients

By Keshav Bansal, CA

The educator expense deduction under IRC §62(a)(2)(D) is no longer limited to kindergarten-through-grade-12 staff. Division B of the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 (H.R. 5334, Public Law 119-111, signed September 18, 2026)—the Supporting Early-childhood Educators’ Deductions Act—amends §62(d)(1) so early childhood educators can claim the same above-the-line deduction for unreimbursed classroom costs. For US CPA firms, the change matters for 2026 returns: Rev. Proc. 2025-32 sets the §62(a)(2)(D) cap at $350 per eligible educator, and OBBBA separately preserves an uncapped itemized educator-expense path under §67(b)(13).

What Public Law 119-111 Division B changed

The enrolled text of H.R. 5334, Division B, section 1, amends §62(d)(1) in two places:

• Eligible educator. In §62(d)(1)(A), it strikes “a kindergarten through grade 12 teacher” and inserts “an early childhood or kindergarten through grade 12 teacher,” so the eligible-educator definition reaches early childhood roles alongside the existing instructor, counselor, principal and aide language.
• School for early childhood. It replaces §62(d)(1)(B) so that, for early childhood education, a “school” includes any school or childcare facility that (I) provides educational or childcare services for more than two individuals (other than individuals who reside at the school or facility) who have not attained age 6, and (II) operates at the public expense or receives a fee, payment or grant for those services—for-profit facilities can qualify. For kindergarten through grade 12, “school” remains any school that provides that education as determined under State law.

The amendments apply to expenses paid or incurred in taxable years beginning after December 31, 2025. Covered.md and the digests/2026-10-13.md note also summarize the same expansion; Current Federal Tax Developments (September 18, 2026), Tom Talks Taxes (October 2, 2026) and SW Accounting (October 11, 2026) covered the rider when the sanctions bill became law.

The $350 above-the-line deduction for 2026

Under §62(a)(2)(D), an eligible educator may deduct, in computing adjusted gross income, expenses that would be deductible under §162 for books, supplies (other than nonathletic supplies for health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom—subject to the statutory dollar limit. Rev. Proc. 2025-32, section 2.12, sets that amount at $350 for taxable years beginning in 2026 (it was $300 for 2022–2025 under prior inflation adjustments).

Because the deduction is above the line, it is available whether or not the taxpayer itemizes, and it lowers AGI. On a joint return, each spouse who is an eligible educator may claim up to $350 of that spouse’s own qualifying unreimbursed expenses. Reimbursed amounts do not count. The 900-hour school-year requirement in §62(d)(1)(A) still applies; Division B did not change that hour test.

OBBBA’s separate itemized educator expense rule

Separately, OBBBA (P.L. 119-21) section 70110 permanently terminates miscellaneous itemized deductions under §67(g) for years beginning after 2017, but adds §67(b)(13) so deductions under §162 for “educator expenses” (as defined in new §67(g)) remain allowed as a miscellaneous itemized deduction not subject to the 2% floor. Under that definition, “educator expenses” are expenses of a type that would be described in §62(a)(2)(D) if that section were applied without the dollar limitation, without the nonathletic-supplies exclusion for health or physical education, and with “as part of instructional activity” substituted for “in the classroom,” and if §62(d)(1)(A) were applied by inserting “interscholastic sports administrator or coach,” after “counselor.” The OBBBA changes apply to taxable years beginning after December 31, 2025.

Practical points for return preparation:

• The same dollar of expense cannot be claimed twice. Use up to $350 first for the above-the-line deduction when the taxpayer qualifies, then consider excess (or coach-only / out-of-classroom / nonathletic PE) amounts on Schedule A if the taxpayer itemizes.
• Coaches and interscholastic sports administrators are in the itemized definition; they are not added to the above-the-line eligible-educator list by Division B.
• Early childhood staff who meet the amended §62(d)(1) tests can use the above-the-line path; if they also itemize and have excess qualifying costs under the broader §67(g) definition, coordinate both.

Do not confuse this classroom-expense package with the separate Education Freedom Tax Credit under §25F. That credit is a state-opt-in scholarship gift credit, covered in our Education Freedom Tax Credit (§25F) guide, not a deduction for supplies a teacher buys.

What US CPA firms should tell clients

• Screen early childhood workers for 2026. Pre-K, preschool and childcare teachers, instructors, counselors, principals and aides who meet the 900-hour test and work at a qualifying facility may newly claim §62(a)(2)(D).
• Confirm the facility, not just the job title. Ask whether the site cares for more than two nonresident children under age 6 and whether it is publicly funded or fee-/grant-supported. For-profit centers are not automatically out.
• Keep unreimbursed receipts. Books, classroom supplies, computers and software, and supplementary materials used in the classroom are the classic §62(a)(2)(D) categories; document that the employer did not reimburse.
• Model AGI vs itemizing. The $350 above-the-line cut always helps AGI-sensitive items. Excess amounts only help if Schedule A beats the standard deduction—coordinate with other OBBBA Schedule A changes discussed in our draft 2027 Form W-4 / OBBBA post.
• Separate household employers from educators. A family that pays a nanny may have household employment tax issues under Pub. 926, not educator expenses. See our nanny tax 2026 guide.

A short firm checklist

• Add an early-childhood / childcare role question to 2026 organizer intake.
• Capture hours worked in the school year (900-hour test) and facility facts (more than two children under 6; public expense, fee, payment or grant).
• List unreimbursed purchases by category and date; exclude amounts the employer repaid.
• Claim up to $350 above the line per eligible educator; park excess or coach-only costs for the itemized analysis.
• Do not double-count the same expense across §62(a)(2)(D) and §67(b)(13).
• Watch IRS form instructions and Pub. 17 updates for how Schedule 1 and Schedule A label the early-childhood change.

Where this fits for Tax Brew readers

Educator-expense screening is seasonal return work that benefits from clear organizers and capacity when filing volume spikes. If you need extra help on tax prep and bookkeeping, see our support for US CPA firms or email info@taxbrewglobal.com.

Check current guidance: this article summarizes Public Law 119-111, Division B (H.R. 5334 enrolled text; signed September 18, 2026), Rev. Proc. 2025-32 §2.12, OBBBA (P.L. 119-21) §70110 / IRC §§67(b)(13) and 67(g) as amended, and secondary coverage in Current Federal Tax Developments (September 18, 2026), Tom Talks Taxes (October 2, 2026) and SW Accounting (October 11, 2026). Confirm the Code and current IRS instructions before advising. This is general information, not tax or legal advice. Sources as of 14 October 2026.