The Personal Income Tax Law allows various credits against the taxes imposed by that law.

This bill would allow a credit against those taxes for each taxable year years beginning on or after January 1, 2026, and before January 1, 2031, in an amount equal to the unreimbursed amount paid or incurred by a qualified teacher during the taxable year for instructional materials and classroom supplies, as defined, not to exceed $250. The bill would define qualified teacher as a teacher in a public, charter, or private school offering instruction in kindergarten or any of grades 1 to 12, inclusive. inclusive, for at least 900 hours during a school year.

Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill also would include additional information required for any bill authorizing a new tax expenditure.

This bill would take effect immediately as a tax levy.

The Personal Income Tax Law allows various credits against the taxes imposed by that law.

This bill would allow a credit against those taxes for each taxable year beginning on or after January 1, 2026, and before January 1, 2031, in an amount equal to the amount paid or incurred by a qualified teacher during the taxable year for instructional materials and classroom supplies, as defined, not to exceed $250. The bill would define qualified teacher as a teacher in a public, charter, or private school offering instruction in kindergarten or any of grades 1 to 12, inclusive, who is within the first 3 years of employment as a teacher. inclusive.

Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill also would include additional information required for any bill authorizing a new tax expenditure.

This bill would take effect immediately as a tax levy.

The Personal Income Tax Law allows various credits against the taxes imposed by that law.

This bill would allow a credit against those taxes for each taxable year beginning on or after January 1, 2026, and before January 1, 2031, in an amount equal to the amount paid or incurred by a qualified teacher during the taxable year for instructional materials and classroom supplies, as defined, not to exceed $250. The bill would define qualified teacher as a teacher in a public, charter, or private school offering instruction in kindergarten or any of grades 1 to 12, inclusive, who is within the first 3 years of employment as a teacher.

Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill also would include additional information required for any bill authorizing a new tax expenditure.

This bill would take effect immediately as a tax levy.

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2025 - 2026 Regular Session

SB 267 (Choi) - Personal income tax: credit: qualified teacher: school supplies

Bill Summary:

SB 267 would authorize a personal income tax credit of up to $250 for unreimbursed costs paid by a K-12 teacher in a public, charter, or private school for specified instructional materials and classroom supplies.

Fiscal Impact:

The Franchise Tax Board (FTB) estimates that this bill would result in General Fund revenue losses of $38 million in 2026-27, and $40 million in 2027-28. FTB’s administrative costs have yet to be identified.

Background:

Tax expenditure programs (TEPs) are special tax provisions that reduce the amount of revenues the “basic” tax system would otherwise generate in order to provide (1) benefits to certain groups of taxpayers, and/or (2) incentives to encourage certain types of behavior and activities, such as charitable giving. Specifically, current law provides for, among other things, various income and corporation tax credits and deductions, as well as exemptions from the sales and use tax. The Department of Finance is required to publish a list of TEPs (currently totaling several hundred), which currently exceed $91 billion annually.

Tax credits reduce a taxpayer’s liability on a dollar-for-dollar basis. Credit amounts that exceed the taxpayer’s current tax year liability can either be (1) refunded to the taxpayer, or (2) carried forward to reduce tax in future years. State tax credits are generally nonrefundable; exceptions include the Earned Income Tax Credit, the Young Child Tax Credit, the Foster Youth Tax Credit, and the Motion Picture and Television Production Credit.

California used to allow a retention tax credit for teachers based upon the taxpayer's years of service as a credentialed teacher (AB 2879, Jackson, 1999). However, the Legislature only allowed the credit for taxable years 2000, 2001, and 2003. It was suspended in 2002 and 2004 through 2006, and was repealed the following year.

Federal law allows eligible elementary and secondary school teachers to deduct up to $250 annually for certain educational expenses. These deductible expenses include (1) participation in professional development courses related directly to the educator's curriculum or students, (2) classroom-related items such as books, supplies, supplementary materials, and computer equipment, including related software and services. Expenses for nonathletic supplies in health or physical education courses are excluded.

Proposed Law:

This bill, for taxable years 2026 through 2030, would among other things, (1) authorize a personal income tax credit up to $250 in a taxable year for unreimbursed costs paid by K through 12 teachers in a public, charter, or private school for instructional materials and classroom supplies, as defined, and (2) allow the credit to be carried forward to the following taxable year (and the succeeding two years, if necessary).

Related Legislation:

• AB 348 (Choi, 2019), was substantially similar to this bill and died in the Assembly Revenue and Taxation Committee.
• AB 250 (Choi, 2021), was also similar to this bill, and would have allowed a credit for amounts paid or incurred by a qualified teacher during the taxable year for instructional materials and classroom supplies, not to exceed $200 for each taxable year beginning on or after January 1, 2022. The bill did not pass out of the Assembly Revenue and Taxation Committee by the constitutional deadline.

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SENATE COMMITTEE ON REVENUE AND TAXATION

Senator Jerry McNerney, Chair

2025 - 2026 Regular

Personal income tax: credit: qualified teacher: school supplies

Authorizes a personal income tax credit up to $250 for unreimbursed costs paid by a K through 12 teacher in a public, charter, or private school for instructional materials and classroom supplies, as defined.

Background

Tax expenditures. California law allows various income tax credits, deductions, exemptions, and exclusions. When a tax law is determined to have a cost in the form of foregone revenues, such as a tax exemption, state law refers to them as "tax expenditures." The Legislature enacts such tax incentives to compensate taxpayers for incurring certain expenses, such as child adoption, or to influence certain behaviors, such as participating in charitable giving. The Legislature uses tax incentives to encourage taxpayers to do something they would otherwise not do “but for” the tax incentive. The Department of Finance must publish a list of tax expenditures annually, currently totaling around $91.5 billion.

Credits. Tax credits reduce the amount of tax owed by a taxpayer on a dollar-for-dollar basis. Credit amounts that exceed the taxpayer’s current tax year liability can either be refunded to the taxpayer or carried forward to reduce tax in future years. However, except for the Earned Income Tax Credit, the Young Child Tax Credit, the Foster Youth Tax Credit, and the Motion Picture and Television Production Credit, all credits against California Personal Income and Corporation Tax are nonrefundable.

Previous state tax credits for teachers. California once allowed a retention tax credit for teachers based upon the taxpayer's years of service as a credentialed teacher (AB 2879, Jackson, 1999). However, the Legislature only allowed the credit for 2000, 2001, and 2003 taxable years, suspended it in 2002 and 2004 through 2006, before eventually repealing it in 2007 (SB 87, Committee on Budget & Fiscal Review).

Federal law. Internal Revenue Code (IRC) 62(a)(2)(D) allows eligible elementary and secondary school teachers to deduct up to $250 annually for certain educational expenses. These deductible expenses include participation in professional development courses related directly to the educator's curriculum or students. Additionally, deductions cover classroom-related items such as books, supplies, supplementary materials, and computer equipment, including related software and services. Expenses for nonathletic supplies in health or physical education courses are excluded.

The author wants provide financial relief to teachers by authorizing a tax credit for unreimbursed costs incurred to furnish their students with classroom supplies.

Proposed Law

Senate Bill 267 authorizes a personal income tax credit up to $250 in a taxable year for unreimbursed costs paid by K through 12 teachers in a public, charter, or private school for instructional materials and classroom supplies, as defined. The bill authorizes the credit for the 2026 through the 2030 tax years and allows for the credit to be carried forward to the following taxable year (and the succeeding two years, if necessary). The bill also contains legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code.

State Revenue Impact

According to the Franchise Tax Board, SB 267 will result in a revenue loss of $43 in FY 2026-27 and $44 in FY 2027-28.

Comments

1. Purpose of the bill. According to the author, “For decades, California has made education a priority in its state budget decisions. However, classroom teachers often shoulder the financial burden of supplying their classrooms with the necessary materials for their students to succeed, from purchasing books, to software services, to writing utensils and so much more. According to the U.S. Department of Education, over 90% of educators purchase school supplies for their students, and spend anywhere from $300 to $500 annually on classroom expenses. SB 267 would create a state personal income tax credit for teachers who personally purchase school supplies for students. This bill would allow qualified teachers to claim a tax credit each year equal to the unreimbursed amount teachers spend on school supplies, not to exceed $250 per taxable year.”
   
2. “Windfall” or “but for” tax benefit? Tax expenditures produce two different outcomes. The first outcome is a “windfall,” where the tax expenditure rewards behavior that would have occurred without the tax benefit. The second outcome is a “but for” tax benefit, where a particular activity would not have occurred without the incentive created by the tax expenditure. SB 267 can be considered a "windfall" tax benefit for teachers who already purchase instructional materials and classroom supplies, as the bill would reimburse costs that would have already occurred regardless of the credit or federal deduction. However, for new or lower-income teachers who might otherwise refrain from buying additional supplies due to financial constraints, the credit could serve as a "but for" tax benefit, incentivizing them to make purchases they would not have made without the tax relief. Lowering the financial barrier may encourage some teachers, especially those early in their careers, to invest in classroom resources they would have otherwise foregone.
   
3. Revenue loss. Existing tax law provides various credits, deductions, exclusions, and exemptions for certain taxpayers. By allowing a personal income tax credit of up to $250 per year for instructional materials and classroom supplies purchased by qualified teachers, SB 267 will result in the State General Fund receiving less revenue. As a result, the state will have to reduce spending or increase taxes to account for the loss.
   
4. Precedent. Income is generally taxable, regardless of the source from which it is derived. If the Legislature provides a personal income tax credit for instructional materials and classroom supplies purchased by qualified teachers, why should it not extend the same treatment for pre-school teachers, teacher aids, or school support staff? This bill may create a precedent for tax credits for the materials and supplies of other professions, thereby eroding the income tax base.
   
5. Equity. Teachers in underfunded schools, particularly in low-income districts, often spend more of their own money on classroom materials. This tax credit can help offset those costs, making teaching more affordable for educators in financially strained communities. New teachers, who typically earn lower salaries and may lack established classroom resources, could benefit significantly from the credit, encouraging them to invest in necessary supplies. Since teachers in lower-income areas are more likely to purchase essential classroom materials, SB 267 helps bridge educational resource gaps and improve learning conditions for disadvantaged students. However, educators in underfunded schools may spend far more than $250 annually on supplies, making the credit insufficient to fully alleviate their financial burden.
   
6. Who benefits? California’s progressive income tax system applies higher marginal rates as annual taxable income grows above certain thresholds. As a result, enacting a personal income tax credit benefits higher income earners more than others, since they are more likely to be able to utilize the full credit amount compared to lower income taxpayers with smaller tax liabilities, unless the tax credit is nonrefundable.
   
7. Conformity. The expenses covered by SB 267 for K-12 teachers through a state income tax credit closely align with the expenses permitted for a deduction under IRC § 62(a)(2)(D), which allows an above-the-line federal deduction of up to $250 for eligible educators. California does not conform to this federal provision, meaning that teachers who claim this deduction on their federal return cannot do so on their state tax return. A possible alternative would be for California to conform to federal law, which could simplify tax administration and reduce taxpayer errors and confusion. Although, a deduction would exacerbate the equity issue raised above.
   
8. Related legislation. AB 348 (Choi, 2019), substantially similar to this bill, died in the Assembly Revenue and Taxation Committee.
   
9. Section 41. Section 41 of the Revenue and Taxation Code requires any bill enacting a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve and detailed performance indicators, along with data collection and reporting requirements (SB 1335, Leno, 2014). To satisfy these requirements, SB 267 finds and declares that the goals of this credit are as follows:

• To provide relief to teachers until more permanent funding can be provided to furnish classrooms with the needed supplies to make the credit obsolete.
• To provide a baseline to determine if education funding reduces the need for qualified teachers to purchase instructional materials and classroom supplies.

To aid the Legislature in determining whether this act meets the goals, purposes, and objectives, SB 267 directs the Franchise Tax Board to submit a report to the Legislature by December 1, 2027, and annually thereafter.

Support and Opposition

(5/9/25)

Support: California Association of Private School Organizations

California Catholic Conference

California Charter Schools Association

Church State Council

Los Angeles County Office of Education

Orange County Board of Education

Opposition: California Tax Reform Association

California Teachers Association

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