Yes, union dues are tax deductible in California, even though the federal deduction for employees is gone. The state never adopted the federal suspension of miscellaneous itemized deductions, so W-2 workers can still write off dues on their California return. Two conditions apply: you have to itemize on your state return, and only the portion of your dues (combined with other qualifying employee expenses) that exceeds 2% of your adjusted gross income actually lowers your tax.
Why California Still Allows It
California’s tax code starts with the federal Internal Revenue Code and then selectively opts out of provisions the state legislature disagrees with. When the Tax Cuts and Jobs Act eliminated the federal deduction for unreimbursed employee expenses in 2018, California refused to follow. The state’s Revenue and Taxation Code says the federal suspension of miscellaneous itemized deductions “shall not apply” for California purposes.1California Legislative Information. California Code, RTC 17076 That single line of non-conformity is why California workers can still deduct union dues while their federal return ignores them.
On the federal side, the deduction is not coming back. Congress removed the sunset date in 2025, making the elimination permanent for federal purposes.2Office of the Law Revision Counsel. 26 U.S. Code 67 – 2-Percent Floor on Miscellaneous Itemized Deductions The California deduction is the one that still matters for employees.
When Itemizing on Your California Return Pays Off
You only get the deduction if you itemize. Itemizing makes sense when your total itemized deductions exceed the California standard deduction, which for the 2025 tax year is $5,706 for single filers and $11,412 for joint filers, heads of household, and qualifying surviving spouses.3Franchise Tax Board. Deductions These figures adjust for inflation, so check the current year when you file. Because California’s standard deduction is much lower than the federal amount, plenty of Californians who take the federal standard deduction still come out ahead itemizing on the state return.
Then comes the 2% floor. Union dues are unreimbursed employee business expenses, a type of miscellaneous itemized deduction. You can only deduct the portion of your total miscellaneous itemized deductions that exceeds 2% of your AGI.2Office of the Law Revision Counsel. 26 U.S. Code 67 – 2-Percent Floor on Miscellaneous Itemized Deductions At an $80,000 AGI, the first $1,600 in these expenses produces no deduction. Only dollars above the threshold count.
Dues alone often don’t clear it. If your yearly dues are $900 and your AGI is $80,000, you’re well short of the $1,600 floor. Stacking dues with other qualifying expenses is usually what makes the deduction real.
Which Parts of Your Dues Actually Qualify
The deduction covers ordinary and necessary expenses required as a condition of your employment. Regular membership dues paid to maintain good standing are the core of what qualifies. Several common union-related payments do not:
- Strike fund contributions, which are treated as contingency contributions rather than dues.
- The portion of your dues that funds lobbying, political campaigns, or political action committees.
- Premiums for life insurance, health insurance, or other personal coverage provided through the union, even when bundled into a single payment.
Your union should send an annual statement breaking down how your payments were allocated. Keep it. That statement shows the Franchise Tax Board which portion of your payments qualifies if your return is audited. Only the amount designated as ordinary and necessary dues should be included in your deduction calculation. If your union hasn’t provided that breakdown, ask for one before you file.
Stacking Other Expenses to Clear the 2% Floor
California lets you combine all unreimbursed employee business expenses and other miscellaneous itemized deductions before applying the floor. The more qualifying expenses you can pull together, the more likely you’ll clear the threshold and get a meaningful deduction.
Expenses reported on Schedule CA (540) that count toward this total include:4Franchise Tax Board. 2025 Instructions for Schedule CA (540)
- Unreimbursed employee expenses on Line 19: work-related travel, uniforms or protective clothing required by your employer, tools and equipment you buy for the job, and professional development courses your employer doesn’t reimburse.
- Tax preparation fees on Line 20: what you paid a preparer or software to file your returns, including e-filing fees.
- Other qualifying expenses on Line 21: certain legal and accounting fees related to producing taxable income, custodial fees for investment accounts, and casualty or theft losses of property used in your job.
A worker with $900 in union dues, $400 in unreimbursed work tools, and $350 in tax preparation fees has $1,650 in total miscellaneous deductions. Against an $80,000 AGI with a $1,600 floor, that produces a $50 deduction. Modest, but real, and the numbers add up faster for workers with higher dues or more out-of-pocket job costs.
How to File It
The process starts on federal Schedule A, even if you’re taking the standard deduction on your federal return. California uses federal itemized deductions as the starting point for state adjustments. Tax software handles this automatically. If you file by hand, complete a blank federal Schedule A to generate the numbers California needs.4Franchise Tax Board. 2025 Instructions for Schedule CA (540)
Next, prepare federal Form 2106 using California amounts to calculate your unreimbursed employee business expenses. Enter the result on Schedule CA (540), Part II, Line 19. Add tax preparation fees on Line 20 and other miscellaneous deductions on Line 21. The total after applying the 2% AGI floor flows into your California itemized deductions.
On Schedule CA, Column B is where you subtract amounts that are deductible for California but not federally. That is the actual place the union dues deduction lowers your California taxable income without touching your federal return. Attach the completed Schedule CA (540) to your Form 540.
Keep your union’s annual statement, receipts for other unreimbursed expenses, W-2 forms, and a copy of the Form 2106 you prepared. The Franchise Tax Board can audit returns for up to four years, and you’ll need these records to back up your deduction.
If You’re Self-Employed, the Rules Are Different
Self-employed workers get a better deal. Union or professional association dues are an ordinary business expense under federal law, deducted on Schedule C, which directly reduces your net self-employment income.5Office of the Law Revision Counsel. 26 U.S. Code 162 – Trade or Business Expenses There is no 2% AGI floor, and the elimination of miscellaneous itemized deductions doesn’t apply because business expenses are a separate category. Self-employed Californians get the deduction on both federal and state returns without itemizing.
Freelancers, independent contractors, and sole proprietors who pay union dues or professional fees as a condition of doing business in their field should report them as a business expense.
Penalties for Overstating the Deduction
Claiming more than you’re entitled to can bring an accuracy-related penalty from the Franchise Tax Board: 20% of the underpayment that results from negligence or a substantial understatement of tax.6Franchise Tax Board. FTB Pub. 1024 – Penalty Reference Chart If the FTB finds a gross overstatement, the penalty rises to 40% of the underpayment tied to the misstatement. Working from your union’s annual statement, deducting only the qualifying portion, and keeping records for at least four years is the straightforward way to stay clear of both.