Are union dues tax deductible? What payroll teams should know

Each week, union members like journeymen and apprentices pay dues. During tax season, these workers might wonder whether that line item is deductible, and they expect payroll teams to have the answer.

Because union dues play a role in both payroll processing and personal tax filing, the topic is easy to misunderstand. So what’s the answer: Are union dues tax deductible? 

Usually no, but tax treatment depends on federal and state tax rules as well as worker classification. This guide covers what employers and employees need to know about withholding, reporting, and compliance.

Disclaimer: Tax reform and state conformity rules can change, so those with filing questions should always consult a qualified tax professional before acting.

Are union dues tax deductible?

For most construction employees today, the answer is unfortunately no. Union dues are generally not tax deductible on a federal return for W-2 employees under current law.

The Tax Cuts and Jobs Act (TCJA) passed in 2017, and it’s the main reason why union dues are no longer deductible. Before then, union dues fell under the umbrella of miscellaneous itemized deductions. Employees who chose to itemize could deduct union dues along with other unreimbursed employee expenses.

The TCJA originally suspended miscellaneous itemized deductions from 2018 through 2025. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, made that suspension permanent starting in 2026. As a result, expenses like union dues, job-related travel, and professional fees are no longer deductible for most W-2 employees, and there is no scheduled date for them to return.

Payroll teams should treat the current rule as active and continuously monitor updates since this is an area that draws attention every year. Because tax laws evolve, anyone with questions about their own tax returns should speak with a tax professional.

How union dues are handled in payroll and tax reporting

Even though union dues generally aren’t deductible, they still play an important role in payroll processing and W-2 reporting. Payroll teams must ensure deductions are withheld and reported consistently. Here are a couple of scenarios finance teams should keep an eye out for.

Union dues as after-tax deductions (the default)

In most construction payroll workflows, union dues are treated as after-tax deductions. Federal income tax and applicable state taxes are calculated first, then union dues are withheld from net pay. Depending on the terms set in the collective bargaining agreement, either employers will pay union dues on behalf of the employee, or employees will pay the union themselves. 

This setup aligns with current federal tax rules. Because the dues aren’t deductible, they don’t reduce taxable wages for income tax purposes. Payroll managers should regularly review deduction codes to confirm that dues aren’t mistakenly set up as pre-tax business expenses.

Box 14 reporting on Form W-2

Many employers choose to list union dues in Box 14 of Form W-2. This box is used for informational reporting only. It’s a catch-all category that employers frequently use to report items that don’t have a dedicated box elsewhere, such as union dues, nontaxable income, and pension plan contributions. 

Listing union dues here helps employees understand total payments made during the year, even though the amount doesn’t affect taxable wages. This doesn’t create a deduction on the federal return. It merely supports transparency and assists employees who live in states where tax treatment differs from federal rules.

Who can still deduct union dues?

Even though union dues are no longer federally deductible for most W-2 workers, there are a few key exceptions. Payroll teams responsible for diverse workforces should understand the specific scenarios where employees can deduct union dues on taxes since different rules may apply.

Self-employed workers and independent contractors (Schedule C)

Self-employed individuals and independent contractors, who report their income and expenses on Schedule C rather than a W-2, can generally deduct union dues as an ordinary and necessary business expense. 

For these taxpayers, union dues are treated like other costs of doing business. The deduction reduces their taxable income directly on their federal return. Payroll teams who work with 1099 contractors should note that this deduction happens on the worker’s tax filing, not through payroll withholding.

W-2 employees eligible to use Form 2106

A narrow group of W-2 employees can still deduct certain unreimbursed job-related expenses, including union dues, on Form 2106. The following employees remain eligible for union dues deductions despite the broad suspension:

• Armed Forces reservists
• Qualified performing artists
• Fee-basis state or local government officials
• Employees with impairment-related work expenses

Payroll managers should flag these roles during onboarding or when setting up benefits. Withholding generally remains the same, but these employees often ask questions during tax season because their filing options differ from other W-2 workers.

Note that most construction workers won’t fall into these categories. For most construction workforces, payroll teams can follow the general rule and treat union dues as nondeductible at the federal level.

Dues paid before 2018

Because union dues paid before the TCJA were deductible under the old rules, workers who paid them before 2018 but never claimed them may still be able to do so by amending a previous year’s tax return. 

Though this situation doesn’t affect current payroll processing, it’s worth knowing if a tenured worker asks whether they can still claim the deduction on older returns.

State tax treatment of union dues: What payroll teams need to know

While most employees can’t deduct union dues on a federal return, they might be able to deduct them on a state tax return, depending on where they live. Contractors running projects across state lines need to know each state’s rules so payroll teams can answer questions correctly when workers file.

States that allow union dues deductions on state returns

In several states, including the following key examples, union dues may still be deductible for state income tax purposes:

• California: Union dues are tax deductible in California because the state didn’t conform to the TCJA.
• New York: New York allows a state-level itemized deduction.
• Pennsylvania: Pennsylvania typically allows employees to deduct union dues from state income.
• Minnesota: Minnesota often allows residents to deduct union dues on state tax returns.

These deductions are claimed on the employee’s state return, not through payroll withholding.

No-income-tax states: When union dues don’t affect withholding

The following states don’t have a state income tax:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

In these locations, union dues deductibility doesn’t affect payroll withholding or state returns. No special configuration is needed beyond standard after-tax deduction handling.

States aligned with federal TCJA treatment

Most states, like Georgia and Virginia, have conformed to the federal TCJA and also don’t allow union deductions for W-2 employees.

For teams running multi-state payroll, the safest practice is to check each state’s conformity status during payroll setup and review. State positions can shift over time, so it’s essential to stay up to date.

Get union dues deductions right in payroll

Most construction workers can’t claim union dues on a federal return, but dues still need to be handled correctly in payroll every pay period. Classifying them as post-tax deductions keeps wages accurate, prevents reporting errors, and makes year-end W-2s cleaner for everyone involved.

Platforms built for construction payroll simplify the whole workflow. Miter Payroll handles union dues as post-tax deductions, tracks union fringe benefits through pay rate groups, generates certified payroll reports for federal WH-347 and state-specific formats, exports cleanly into LCPtracker and other labor compliance systems, and produces W-2s with Box 14 dues totals included.

Knowing the federal rule, the state-by-state variations, and how dues flow through your payroll system means payroll leads can answer questions from journeymen and apprentices without hedging, and keep certified payroll filings clean at the same time.