RAISE Act Creates $1,000+ Refundable Tax Credit for Teachers, Mandates $5.2 Billion for Salary Boosts

The RAISE Act of 2025—officially the Respect, Advancement, and Increasing Support for Educators Act—is a major legislative effort focused squarely on boosting the take-home pay and financial stability of teachers and early childhood educators. This bill tackles the issue from three directions: a new federal tax credit, a better deduction for classroom expenses, and mandatory funding to push local school districts to increase salaries.

The New Tax Credit: Cash Back for Educators

Section 2 establishes a brand-new, refundable tax credit (Section 36C) for eligible educators. Think of this as a direct subsidy. If you qualify, you get a base credit of $1,000. On top of that, if you work at a high-need school—defined as one receiving Title I funds, serving Bureau of Indian Education students, or certain early childhood programs—you get a bonus amount. This bonus is calculated based on the school’s student poverty ratio, with a maximum bonus tied to a $14,000 figure that is adjusted for inflation starting in 2027. For a teacher in a high-poverty urban or rural district, this credit could be significantly more than the base $1,000.

To qualify, K-12 teachers must be the teacher of record for at least 75% of a full-time schedule and must have met their state’s certification requirements for at least one year. Early childhood educators also qualify, provided they hold specific credentials (like a Child Development Associate credential) and meet similar time commitments. This is the government stepping in to provide direct financial relief, acknowledging the high cost of living and the relatively flat pay scale many educators face.

Protecting the Paycheck: No Funny Business Allowed

Crucially, the bill includes strong protections to ensure this new federal benefit actually lands in the educator’s pocket and isn't used as an excuse to cut local pay. State and local educational agencies are explicitly prohibited from reducing a teacher's pay or existing loan forgiveness just because they are now eligible for this federal credit. They must also prove that their funding allocations maintain the exact same level of compensation funding as if the credit didn't exist. This prevents local governments from seeing the federal credit as a chance to shift their own budget priorities, a common concern when new federal benefits are introduced. Similarly, employers cannot use the credit amount when calculating compensation in collective bargaining agreements or retaliate against an educator for receiving it.

Doubling the Deduction and Welcoming Daycares

Section 3 addresses the perennial problem of teachers paying out-of-pocket for supplies. It doubles the existing deduction for unreimbursed classroom expenses from $250 to $500. While $500 still might not cover a full year of expenses for many teachers, it’s a significant improvement. More importantly, this section expands eligibility to include early childhood educators who work at least 1,020 hours a year. Previously, this deduction was only available to K-12 teachers. Now, the dedicated person running a classroom at a qualifying daycare or preschool can finally claim some relief for the crayons, books, and materials they buy themselves.

The $5.2 Billion Incentive to Raise Salaries

Perhaps the biggest long-term structural change comes in Section 4, which mandates federal funding to incentivize local educational agencies (LEAs) to maintain or increase teacher salaries. The bill sets aside a mandatory $5.2 billion for the 2026 fiscal year, with future appropriations automatically adjusted for inflation using the Consumer Price Index. A portion of this money is reserved for grants to LEAs that, in the previous school year, either maintained or increased their teacher salary schedule for all teachers.

This funding is distributed based on the number of low-income children served by the LEA, ensuring that districts with the highest need get the most help. Districts that receive these grants can use the money for things like comprehensive training, specialized certifications (like National Board certification), or strong mentoring programs. The rule here is that this federal money must supplement existing state and local efforts—it cannot supplant them. This means the money is intended to be an addition to, not a replacement for, existing local salary budgets, aiming to push overall compensation higher.