March 21, 2013
By Salvatore J. Armao, CPA/PFS, CFP, CFE
Labor union and public employee union members in the United States may be able to deduct their union dues as a miscellaneous deduction on their federal income tax form if they itemize their deductions. While union benefits may be taxed as income, union dues and other contributions or assessments to a union related to the taxpayer's employment are a deductible miscellaneous expense.
Dues paid for membership in a labor union or public employees' union, as well as membership dues in other non-union employment or profession-related associations, are deductible by U.S. taxpayers on Line 21 of Schedule A (Job Expenses and Certain Miscellaneous Deductions), as an unreimbursed employment-related expense. This deduction is only available to taxpayers who choose to itemize their deductions on Schedule A, rather than take the Form 1040 Standard Deduction.
Income Floor Requirement
Union dues are among the Schedule A deductions which can only be claimed to the extent that they exceed 2% of the taxpayer’s adjusted gross income. Taxpayers must subtract 2% of their adjusted gross income from the total sum of those Schedule A deductions which are subject to this income floor, and may only claim as deductions the amount remaining after this subtraction.
Taxpayers may also include on their Schedule A, Job Expenses and Certain Miscellaneous Deductions, some of the assessments and contributions paid to unions other than dues. IRS regulations preclude taxpayers from deducting amounts paid to unions for union pension funds or for illness, accident or death benefit payments. Monies paid to unions for political lobbying or campaign activities can also usually not be deducted as employment-related expenses, but may be able to be deducted as political campaign contributions or other qualifying non-profit donations. Many other union assessments and contributions may be deducted along with dues. Additional information is available at http://www.irs.gov/publications/p17/ch28.html.
Withholding from Wages
If union dues or other union-related assessments are withheld from the taxpayer's paycheck, he or she must still claim those dues as taxable income incorporated into his or her adjusted gross income. The taxpayer can then enter the amount which was withheld on his or her Schedule A if itemize deductions are chosen.
There is no limit on the amount of union dues that may be deducted, provided it is over the floor of 2% of adjusted gross income.
For over 25 years, Armao, Costa & Ricciardi, CPAs, P.C., has been committed to providing accounting, auditing, tax, financial and wealth management and advisory services to labor unions and employee benefit funds. Visit us at www.acrcpa.com. Mr. Armao can be reached at 516.256.3200 or email@example.com.