Most W-2 employees will now be unable to deduct union dues from their federal taxes. For the last eight tax years, the deduction for unreimbursed employee expenditures was removed by the Tax Cuts and Jobs Act (TCJA) 2017. L&Y Tax Advisor Services further explain why are union dues no longer eligible for tax deduction.
Background: Pre-TCJA Deduction Rules
In the days before the TCJA, union dues were classified as various itemized deductions. Those who decided to itemize deductions on Schedule A and whose costs exceeded 2% of their adjusted gross income (AGI) were eligible to deduct them.
As a result, many union members could deduct the expenses related to their work from their taxable income.
Why are Union Dues No Longer Eligible for Tax Deduction?
The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the tax deduction for most workers’ union dues in the US. This bill canceled the deduction for unreimbursed employee expenditures, which included union dues, from 2018 through 2025.
The adjustment was made to raise the standard deduction and simplify the tax system. Therefore, union members cannot deduct these expenses unless they are self-employed, in which case dues may still be deductible as a business expenditure.
This change has drawn criticism for lessening tax equity for employees who depend on unions for workplace protections and collective bargaining.
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Exceptions and State-Level Considerations
There are certain exceptions even when the federal deduction is suspended:
Self-Employed People
On Schedule C of Form 1040, self-employed people can still claim union dues as a business cost.
Specific Professions
Using Form 2106, some professionals may still deduct unreimbursed employee expenditures, including union dues, like:
- Fee-based state or local government officials
- Qualifying performing artists
- Armed Forces reservists
State Tax Deductions
Union dues may be deducted on state income tax returns in a few states, such as:
- New York
- Pennsylvania
- Minnesota
To determine if they qualify, taxpayers should speak with a tax expert or refer to their state’s tax regulations.
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Prospects for the Future
The federal deduction for union dues will no longer be available. Legislation like the proposed Tax Fairness for Workers Act aims to reinstate the deduction for unpaid employee expenditures and union dues. However, it is still unclear if such legislation will succeed.
The Bottom Line
Comprehending why are union dues no longer eligible for tax deduction helps you realize its impact on several workers. There are specific exclusions and state-level deductions. However, the wider ramifications draw attention to continuous discussions over tax justice and how to handle costs connected to the workplace. To manage their unique circumstances, taxpayers should seek advice from tax experts and remain current on future legislation changes.
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