LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 6436 NOTE PREPARED: Dec 4, 2024
BILL NUMBER: HB 1306 BILL AMENDED:
SUBJECT: Tax Credit for Teacher's Classroom Supplies.
FIRST AUTHOR: Rep. Andrade BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State
DEDICATED
FEDERAL
Summary of Legislation: The bill increases the maximum amount of the income tax credit for an individual
employed as a teacher for amounts expended for classroom supplies from $100 to $300 per taxable year.
Effective Date: January 1, 2025 (retroactive).
Explanation of State Expenditures: Department of State Revenue (DOR): The DOR will incur additional
expenses to revise forms, update instructions, and modify the existing tax processing system to implement
this bill. The DOR’s current level of funding and resources should be sufficient to administer this tax credit.
Explanation of State Revenues: The bill modifies the public school educator expense tax credit. It
increases the maximum income tax credit a teacher receives for classroom supply expenses from $100 to
$300. The modification is effective beginning in tax year 2025. The bill is estimated to reduce state General
Fund revenue by between $9.7 M and $12.8 M annually beginning in FY 2026.
Additional Information - This bill increases the tax credit for teachers’ un-reimbursed classroom expenses.
The nonrefundable credit equals the lesser of $300 or the total amount paid by teachers for classroom
supplies during the taxable year. The bill ties the definition of classroom supplies to the current federal
definition of classroom supplies eligible for a federal income tax deduction for classroom expenses. Under
this definition, certain expenses for professional development courses related to the curriculum or to the
students that the educator teaches are also eligible expenses for the credit. The credit must be claimed in the
tax year of the qualifying expenses. Unused credits may not be carried forward or carried back. The credit
may not exceed the amount of the individual’s Adjusted Gross Income (AGI) Tax liability. Revenue collected
from the Individual AGI Tax is deposited in the state General Fund.
The lower bound estimate assumes a similar number of tax filers continue to claim the state credit. In tax year
2022, 44,662 state income tax filers claimed the credit. The upper bound estimate assumes the number of
filers claiming the state credit increases to equal the number of Indiana federal income tax filers who claim
the educator expense deduction, 58,693 on average for tax years 2019-2021. Both estimates assume that filers
claiming the maximum credit amount under current law would be able to claim $300 under the bill. The
HB 1306 1 estimate allows for some taxpayers to have insufficient tax liabilities to exhaust the full value of the
nonrefundable credit. Both estimates also allow for some taxpayers to spend less than the current $100 credit
limit.
During the 2019-2020 school year, Indiana school teachers spent an average of $432 on un-reimbursed
classroom supplies according to the National Teacher and Principal Survey conducted by the National Center
for Education Statistics.
Explanation of Local Expenditures:
Explanation of Local Revenues:
State Agencies Affected: Department of State Revenue.
Local Agencies Affected:
Information Sources: LSA Income Tax Database; Internal Revenue Service, Statistics of Income Tax Stats
- Historic Table 2: State Data Tax Year 2019-2021; Internal Revenue Service, Educator Expense Deduction.
https://www.irs.gov/taxtopics/tc458; National Center for Education Statistics,
https://nces.ed.gov/surveys/ntps/estable/table/ntps/ntps2021_6801_t12ns.
Fiscal Analyst: Camille Tesch, 317-232-5293.
HB 1306 2