Taxation and Regulatory Compliance

Are Union Dues Tax Deductible in Illinois?

Discover how union dues are treated under federal and Illinois state tax law. A comprehensive guide for members.

Union dues represent a regular financial commitment for many workers, and a common question arises regarding their tax deductibility. Understanding how these payments are treated under both federal and state tax laws is important for taxpayers seeking to manage their financial obligations effectively. Tax laws can be complex and subject to change, making it necessary to stay informed.

Federal Income Tax Treatment

For tax years 2018 through 2025, union dues are not deductible for federal income tax purposes for most employees. This change resulted from the Tax Cuts and Jobs Act (TCJA) of 2017, which suspended miscellaneous itemized deductions previously subject to the 2% adjusted gross income (AGI) limit.

Before 2018, employees could deduct union dues as an unreimbursed employee business expense on Schedule A (Form 1040), but only to the extent that these and certain other miscellaneous expenses exceeded 2% of their AGI. For employees, union dues paid from 2018 through 2025 cannot be claimed as a deduction on their federal tax returns.

The suspension of these deductions impacts a broad range of expenses that were once partially deductible, including unreimbursed job expenses, tax preparation fees, and investment fees. While the law is set to revert to pre-TCJA rules after 2025, the current period does not allow for such deductions for the majority of employed individuals. Self-employed individuals, however, operate under different rules and may still deduct union dues as a business expense on Schedule C if the dues are related to their trade or business.

Illinois State Income Tax Treatment

Illinois income tax calculation begins with a taxpayer’s federal adjusted gross income (AGI). The state applies a flat income tax rate to this AGI, with certain state-specific additions or subtractions, and allows for personal exemptions rather than a broad system of itemized deductions. For the average employee, if union dues are not deductible at the federal level, they are not deductible for Illinois state income tax purposes either.

Legislative efforts in Illinois have sought to create a state-level deduction for union dues. Several bills have been introduced in the Illinois General Assembly. These proposals aim to allow a deduction for the full amount of union dues paid by a taxpayer if a federal deduction was not allowed due to Internal Revenue Code Section 67. If any portion of the union dues was allowed as a federal deduction, the proposed Illinois deduction would be a percentage of the federally disallowed amount.

As of now, for most taxpayers, Illinois does not have a specific, applicable deduction for union dues. The state’s tax structure relies heavily on the federal AGI as its starting point. While legislative proposals indicate a potential future change, taxpayers should consult current Illinois Department of Revenue guidance for up-to-date information on state-specific deductions.

Documenting Union Dues

Even when union dues are not currently deductible, maintaining accurate records of these payments remains a sound financial practice. The Internal Revenue Service (IRS) requires taxpayers to keep records that support income, deductions, and credits for a minimum of three years from the date a return was filed.

Relevant documentation for union dues includes pay stubs showing deductions, union statements, or receipts for direct payments. Keeping these records organized is beneficial for personal financial tracking and future reference. Should tax laws change and union dues become deductible again, having these records readily available allows taxpayers to substantiate their claims. This proactive approach ensures preparedness for potential shifts in tax legislation.

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