Union Dues and Their Tax Deductibility: All You Need to Know
Every tax season, people look for ways to reduce their tax liability. Some want to know if union dues are tax deductible.
According to the Bureau of Labor Statistics, about 11 percent of the U.S. labor force belongs to unions. Union dues, which are monthly contributions members make to a union based on their working status, help fund crucial union operations such as contract negotiations and member-driven programs.
As union dues are employee business expenses, in that they're paid for the purpose of carrying out a job for an employer, some taxpayers want to know if they're deductible.
The TCJA made union dues non-tax deductible
Prior to 2018, an employee who paid union dues may have been able to deduct unreimbursed employee business expenses, including union dues. Eligible taxpayers were allowed to include itemized deductions of expenses exceeding 2 percent of the employee’s adjusted gross income.
However, when Donald Trump signed the Tax Cuts and Jobs Act (TCJA) into law in 2017, employees were no longer allowed to deduct union dues on their federal tax return, even if they're able to itemize deductions.
When union dues are tax deductible
If you’re self-employed and pay union dues, you can deduct them as a business expense. And, according to the IRS, the following can still deduct job-related expenses as adjustments to their gross income:
- Armed Forces reservists.
- Qualified performing artists.
- Fee-basis state or local government officials.
- Employees who are disabled or have impairment-related expenses.
To take the deduction, qualified employees must complete Form 2106.
Job-related expenses may also be deductible in your state tax return. Minnesota and Pennsylvania, for example, allow union dues to be deducted.
There were calls to reintroduce union dues tax deductions, with the claim that governments should empower workers to organize rather than make it harder. In 2018, Democrats introduced the Tax Fairness for Workers Act, which seeks to make union dues deductions "above the line," so that they're available to everyone, not just those who itemize. The provision allows for $250 in dues to be claimed as an above-the-line deduction for taxable years beginning after Dec. 31, 2021.