If you're working in a union job, some of your wages go to the union rather than being included in your take home pay. Although the dues go to a good cause and you don't really mind paying them, the chance to get some of that money back at tax time in appealing. However, even though union dues technically are deductible expenses, several factors make it unlikely they'll save you much in the way of taxes. It all depends on how you file and which deduction method you choose.
In keeping with IRS guidelines, union dues are considered an unreimbursed employee expense and are subject to specific limitations during the deduction process.
Some Portion of Union Assessments are Tax Deductible
Your union dues, plus any initiation fees you pay when you join the union, count toward your unreimbursed employee expense deduction on your taxes, just like travel expenses and other employee expenses. You also can include the costs of benefits paid to unemployed union members.
Because the IRS classifies union dues as an unreimbursed employee expense, the deduction is subject to the 2 percent of adjusted gross income limit. That means that until your expenses exceed 2 percent of your total taxable income – minus certain deductions like traditional IRA contributions and student loan interest – you can't deduct anything. For example, if your AGI is $22,000, only your union dues and other unreimbursed employee expenses exceeding $440 are deductible.
You can't include any portion of your payments to the union that are for your medical, accident or death benefits, or payments for a retirement fund, even if they're mandatory.
You Must Itemize Deductions to Take the Union Dues Deduction
The other hurdle you have to surpass to make deducting union dues save you on your taxes is itemizing. When you itemize, you can't claim the standard deduction, so unless your total itemized deductions exceed your standard deduction, you won't save money. Other itemized deductions include state income taxes, charitable contributions and mortgage interest. The only way to know which deduction method is the best for your situation is to add up all your deductions. If the total amount exceeds the standard deduction amount, then itemize. If it's less than the standard deduction for your filing status, take the standard deduction.
2018 Standard Deduction
The standard deduction has increased for the 2018 tax year. For individuals filing single or married filing separately, the standard deduction is $12,000. For married couples filing jointly, the standard deduction is $24,000. The deduction is $18,000 if you file head of household.
This means that your itemized deductions have a higher threshold to reach. If you're single and your itemized deductions total $11,000, you'll get a greater benefit from taking the standard deduction, which is more.
The IRS has yet to release the tax forms for 2018, as they are being revised to reflect the new laws.
2017 Standard Deduction
For the 2017 tax year, the standard deduction was only $6,350 for single or married filing separately; $9,350 for head of household and $12,700 for married filing jointly.
If you have enough union dues and other write-offs to make claiming them worth your while, file your taxes with Form 1040 and itemize with Schedule A. On Schedule A, the union dues and any other unreimbursed employee expenses, like lab breakage fees or professional association dues, go on line 21. After getting combined with your other itemized deductions, the total replaces your standard deduction on line 40 of your Form 1040 tax return.
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Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."