New Tax Rules and Court Cases: What Educators Need to Know for 2025 and Beyond
1. Retirement Plan Changes Designed for You
Automatic Enrollment in School Retirement Plans
Beginning with plan years after December 31, 2024, most new employer-sponsored retirement plans — including the 403(b) plans commonly offered in educational institutions — must automatically enroll eligible employees. That means more educators will be building retirement savings without having to take the first step themselves.
Student Loan Payments Can Earn Retirement Matches
Starting with the 2024 plan year, schools and universities can treat your qualifying student loan payments as if you contributed to your retirement plan. This allows you to receive an employer match even if you can’t afford to put money into the plan because you’re paying down student debt.
Bigger Catch-Up Contributions
If you’re age 50 or older, you may already be making extra “catch-up” contributions to your retirement account. Starting in 2024, IRA catch-up limits will be indexed for inflation. Beginning in 2025, educators ages 60–63 will get an even larger boost in their allowable catch-up amounts.
2. Educator Expense Deduction Adjusted for Inflation
The familiar educator expense deduction — which lets K–12 teachers deduct the cost of classroom supplies they buy with their own money — is indexed for inflation. While the increase may be modest, it still means a little more of your supply purchases can be written off each year.
3. The One Big Beautiful Bill Act: A Game-Changer
Signed into law on July 4, 2025, this legislation makes several taxpayer-friendly changes permanent:
Lower Tax Rates Stay for Good
The reduced tax brackets first introduced by the Tax Cuts and Jobs Act will no longer expire in 2025. Rates from 10% to 37% will remain in place, and bracket thresholds will continue to adjust for inflation.Higher Standard Deduction
Starting in 2025, the standard deduction increases significantly — $31,500 for joint filers, $15,750 for single filers (indexed). Many educators who don’t itemize will see lower taxable income.Employer-Paid Student Loan Assistance is Permanent
Employers can continue to pay up to $5,250 annually toward your student loans, tax-free. This exclusion is now permanent and will be indexed starting in 2027.
4. Health Savings Accounts Get a Boost
For those covered by high-deductible health plans, the 2025 HSA contribution limits rise to $4,300 for self-only coverage and $8,550 for family coverage. This lets you shelter more money pre-tax for healthcare costs.
5. IRS Reporting Changes for Side Income
If you earn extra income outside your primary education job — whether by tutoring, selling teaching materials online, coaching, or running any side business — you may be affected by the lower reporting threshold for Form 1099-K.
Old rule: Payment apps and online marketplaces (like PayPal, Venmo, Etsy, or Teachers Pay Teachers) only had to issue you a Form 1099-K if you had more than 200 transactions and over $20,000 in payments in a year.
New rule: Starting with 2024 tax returns, a Form 1099-K will be issued if your total payments exceed $5,000 in a calendar year, regardless of the number of transactions.
The IRS originally planned to drop the threshold to $600 but delayed that step. The $5,000 threshold is now the transition point, and a further drop may still happen in future years.
Why it matters:
Even if you don’t receive a Form 1099-K, you’re still required to report all taxable income. But with this lower threshold, many educators who sell lesson plans, e-books, or offer side services will now receive IRS-reported forms for the first time.
6. Court Rulings Impacting Education Professionals
Recent tax court cases reinforce that professional development and continuing education costs must clearly qualify as “ordinary and necessary” to be deductible. In addition, rulings like Soroban Capital Partners LP v. Commissioner could affect adjunct faculty and education consultants working as part of partnerships, especially in determining self-employment income.
What This Means for You
Starting in 2025, educators will benefit from higher standard deductions, permanent lower tax rates, more generous retirement savings options, and ongoing student loan assistance.
In 2026 and beyond, expanded automatic retirement plan enrollment and bigger late-career catch-up contributions will kick in, creating even more opportunities to grow retirement savings.
Bottom line:
If you work in education, these changes mean more opportunities to lower your taxable income, pay off debt faster, and build long-term financial security. But they also mean you’ll need to stay informed, keep good records, and take advantage of every benefit available to you.