Author Topic: Joining a union. Is anything deductible?  (Read 3573 times)

sheepstache

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Joining a union. Is anything deductible?
« on: July 16, 2015, 08:43:13 PM »
So my workplace organized and now my position is going to be a union one. 2% of my wages will go to the union. I'm not certain what that goes towards exactly, health benefits, pensions, etc. The IRS website seemed to be saying I could deduct that if I itemize? I also have to pay a big initiation fee this year so it would make sense this year. And that it depended on usage, like the percentage that goes towards political lobbying isn't deductible. But then someplace else seemed to be saying it was only deductible above 2% of AGI. But then, I don't know if there's a difference between a flat fee that's called union dues vs. the percentage taken out of wages? Does anyone have any info about this? Or even about what I should be asking? I'm the numbers person so my co-workers are asking me about what this means in terms of take home pay.

TheAnonOne

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Re: Joining a union. Is anything deductible?
« Reply #1 on: July 17, 2015, 01:51:41 PM »
So my workplace organized and now my position is going to be a union one. 2% of my wages will go to the union. I'm not certain what that goes towards exactly, health benefits, pensions, etc. The IRS website seemed to be saying I could deduct that if I itemize? I also have to pay a big initiation fee this year so it would make sense this year. And that it depended on usage, like the percentage that goes towards political lobbying isn't deductible. But then someplace else seemed to be saying it was only deductible above 2% of AGI. But then, I don't know if there's a difference between a flat fee that's called union dues vs. the percentage taken out of wages? Does anyone have any info about this? Or even about what I should be asking? I'm the numbers person so my co-workers are asking me about what this means in terms of take home pay.

Good luck....

In the few unions I was in, the dues went to simply keeping the union funded. Your health benefits, pension and other benefits are additional fees through the company still.

Cpa Cat

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Re: Joining a union. Is anything deductible?
« Reply #2 on: July 17, 2015, 02:31:04 PM »
Union dues (and initiation fees) are deductible as unreimbursed employee expenses. Those are an itemized deduction subject to the 2% of AGI limitation (ie: only amounts over 2% of AGI are deductible).

That 2% limitation includes ALL of your 2% Miscellaneous deductions, which include other unreimbused employee expenses, tax prep fees, investment fees, etc.

Your union will probably give you an annual statement indicating what percentage is lobbying so that you can remove that (if they don't, you can ask them).

The IRS gives some examples of other items that might also be deductible as unreimbursed employee expenses. http://www.irs.gov/publications/p529/ar02.html

Basically, you're going to end up in the deductibility zone for 2% Misc deductions with your union dues alone, so it's probably worth it to you to save receipts for any and all other 2% Misc deductions.

For example:

Agi = 50,000
2% of AGI is $2000
So you need more than $2000 of Misc deductions (in addition to having enough total itemized deduction to make itemizing worthwhile).


Assuming you have enough to itemize in total, you also have:
$2000 in Union Dues
$500 in Union initiation fees
$100 in deductible Meals work-related ($200 total, 50% of which are deductible)
$100 for tax software
$100 for a work-related license

For a total of: $2800 in 2% Misc deductions

Due to the 2% limitation, $800 will end up being deducted as itemized deductions.


sheepstache

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Re: Joining a union. Is anything deductible?
« Reply #3 on: July 18, 2015, 06:52:11 AM »
Thank you so much, CPA Cat! 

So, if dues are 2% of salary, that probably means they'll be more than 2% of AGI for most people, because they'll have above the line deductions like student loan interest, HSAs, traditional Roths, etc. Although investing dividends and any non-union work will take it back in the other direction.

Cpa Cat

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Re: Joining a union. Is anything deductible?
« Reply #4 on: July 18, 2015, 10:42:18 AM »
CPA Cat, I think I've been claiming a deduction improperly and want your thoughts.

When we moved here, my husband joined the local musician's union. You can join by paying a fee, which he did, regardless of whether you do any union work. Until last week, he never got any union work; he joined mainly to gain access to the extremely valuable union membership directory. Since he freelances as a pianist, I had deducted the union dues as a business expense. Did I do this wrong?

No. Things work differently when you're a freelancer with a Schedule C. You are allowed to deduct such business expenses directly on Schedule C and do not need to visit Schedule A.

You would only put union dues (or any other unreimbursed employee business expense) on Schedule A as a 2% Misc itemized deduction if you're a W-2 employee working for someone else.

ncornilsen

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Re: Joining a union. Is anything deductible?
« Reply #5 on: July 20, 2015, 03:38:07 PM »
So my workplace organized and now my position is going to be a union one. 2% of my wages will go to the union. I'm not certain what that goes towards exactly, health benefits, pensions, etc. The IRS website seemed to be saying I could deduct that if I itemize? I also have to pay a big initiation fee this year so it would make sense this year. And that it depended on usage, like the percentage that goes towards political lobbying isn't deductible. But then someplace else seemed to be saying it was only deductible above 2% of AGI. But then, I don't know if there's a difference between a flat fee that's called union dues vs. the percentage taken out of wages? Does anyone have any info about this? Or even about what I should be asking? I'm the numbers person so my co-workers are asking me about what this means in terms of take home pay.



Good luck....

In the few unions I was in, the dues went to simply keeping the union funded. Your health benefits, pension and other benefits are additional fees through the company still.

My union dues were used to fund a Mercedes for the local's president and yearly Vegas 'retreats' for the union staff, and to support political candidates who had the expressed goal of shutting down our industry.

They bilked the workers for enough that it was a significant deduction each year, even when subjected to the 2% limitation.

Spondulix

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Re: Joining a union. Is anything deductible?
« Reply #6 on: July 20, 2015, 07:26:14 PM »
Sheepstache do you have to pay an initiation fee? That's deductible, too. I didn't get any sort of paperwork at the end of the year (other than the numbers on my paystub) so remember to check when you're doing your taxes.

I've been in a couple unions - one was terrible and the other is fantastic. My current union I get a paid lunch hour. There's a penalty fee if they call me at home. We're about to re-negotiate a new contract, and there's no way in hell we'd be able to keep benefits like that (or any of the other perks - health care funding, etc) without the union.

Cheddar Stacker

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Re: Joining a union. Is anything deductible?
« Reply #7 on: July 20, 2015, 08:46:49 PM »
Good response already from Cpa Cat, I just wanted to clarify one hopefully obvious thing that I haven't heard mentioned. If the union dues are withheld from your paycheck, there is a chance they are coming out before your taxable income, meaning they've already been deducted. Make sure you aren't deducting them twice.

sheepstache

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Re: Joining a union. Is anything deductible?
« Reply #8 on: July 21, 2015, 08:16:19 AM »
Sheepstache do you have to pay an initiation fee? That's deductible, too. I didn't get any sort of paperwork at the end of the year (other than the numbers on my paystub) so remember to check when you're doing your taxes.

I've been in a couple unions - one was terrible and the other is fantastic. My current union I get a paid lunch hour. There's a penalty fee if they call me at home. We're about to re-negotiate a new contract, and there's no way in hell we'd be able to keep benefits like that (or any of the other perks - health care funding, etc) without the union.

I do. Unfortunately we're signing up next month so I'll only have been paying union dues for 5 months so that'll be more like 1% of my AGI, so some of the initiation fee will get sucked into meeting the 2% (and I don't normally itemize anyway). And we won't have earned enough for this to count as a pension credit year. Mustachian problems: I'm the only one who thinks about these things.

It's a good union and might turn out great for my career in terms of other job opportunities. But my current employer was already pretty reasonable before the contract, so I'm wary of changes.

Good response already from Cpa Cat, I just wanted to clarify one hopefully obvious thing that I haven't heard mentioned. If the union dues are withheld from your paycheck, there is a chance they are coming out before your taxable income, meaning they've already been deducted. Make sure you aren't deducting them twice.
Oh believe me I will be checking that paystub. If they come out pre-tax, I'm assuming they're deductible and it'll just be reflected in my W-2 like my voluntary 401k contributions are.

ncornilsen

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Re: Joining a union. Is anything deductible?
« Reply #9 on: July 21, 2015, 12:04:53 PM »
Why would the employees vote to organize if your employer was already reasonable?   A union has a vested interested in creating and maintaining a bad relationship between employers and employees, so they can sell you the 'service' of handling that relationship. There are stirrings of organizing going on at my place of work. The employer pays and offers benefits much higher than any others in the area for similar work, and I've always felt has been fair and reasonable, so I'm trying to understand what else is to be gained for the $70/week they're saying the dues will be.

Mirwen

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Re: Joining a union. Is anything deductible?
« Reply #10 on: July 21, 2015, 02:17:52 PM »
Unions are generally a good idea when there is not an open market for employment and so one employer could abuse their power.  For example, in a small town when there is just one big business that a large portion of the city works for.  Another example would be in my metropolitan area there is only one school district and so only one major employer for all licensed teachers.  Essentially unions are a balance against an employer monopoly.  However the support staff union makes less sense because I can get a job any number of places as an computer tech.  I joined the union anyway.

If there are several employers locally where you could do your same job, I see no advantage to a union.  Competition for the best employees will keep things in check.

sheepstache

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Re: Joining a union. Is anything deductible?
« Reply #11 on: July 21, 2015, 03:05:42 PM »
Eh, as far as bad relationships, it takes two to tango. By "reasonable" I mean we had health benefits and the employer wasn't trying to break labor laws. People were concerned about a string of random firings and frequent changes in management and policy. "Cost of living" raises were company wide and happened without negotiation. The year organization started everyone got 0%. And our boss suddenly got fired with no contingency plan for who we would report to. It was kind of a perfect storm situation.

Now we feel like the terms of our employment are more stable. And with someone actually there to negotiate for us, it feels like we're more likely to keep up with the rest of our industry. And if we don't, we have better job opportunities for having joined. The union jobs are kind of the gold standard in this area for safety including overtime rules, so ironically, the fact that we were at one of the few non-union places where things were okay made people eager to secure that officially.

It's also less common to be working at a place full time. The union is extremely popular because so much of the available work is freelance that the best way to get benefits is to pay in via dues.

The things I'm wary about are concerning my individual situation. For example some percentage the employer contributed to a 401k now goes to a pension and we have to become vested in that. But some people really like the idea of pensions. I pay a bit more in tax, but the dental plan is better. People with dependents on their health insurance will pay a lot less. Stuff like that.