The provisions of the new tax reform law, sometimes called the Tax Cuts and Jobs Act, are mostly in play for individual taxpayers for the current tax year (though some, like the repeal of the tax-favored treatment of alimony and the elimination of Obamacare individual mandate, won’t kick in until next year). But not everyone is happy with that result. While tax-favored provisions for the self-employed remain on tap, those for workers were largely eliminated. In response, Sen. Bob Casey, Jr., (D-PA) has introduced S.2718, the Tax Fairness for Workers Act.
The short version of the bill reads as follows:
To amend the Internal Revenue Code of 1986 to allow workers an above-the-line deduction for union dues and expenses and to allow a miscellaneous itemized deduction for workers for all unreimbursed expenses incurred in the trade or business of being an employee.
Though it’s relatively brief by Congressional standards, the bill tackles a few issues. Let me break them down for you.
For the 2017 tax year, union dues and expenses were deductible on Schedule A as miscellaneous deductions subject to the 2% floor. That means that they, along with other miscellaneous job-related expenses, were deductible to the extent that they exceeded 2% of your adjusted gross income (AGI). Here’s an example: Let’s say that your AGI in 2017 was $50,000 and your job-related expenses totaled $3,000 for that year. For the 2017 tax year, you could have deducted $2,000 of those expenses. That’s because 2% of $50,000 is $1,000, and expenses over that amount ($3,000 less $1,000 = $2,000) would have been deductible.
The picture looks different this year. Unreimbursed job expenses and miscellaneous deductions subject to the 2% floor have been eliminated for the tax years 2018 through 2025. Those expenses include those that you incur in your job for which you are not reimbursed, like tools and supplies; required uniforms not suitable for ordinary wear; dues and subscriptions; and job search expenses. They also include unreimbursed travel and mileage, as well as the home office deduction.
Under Sen. Casey’s proposal, tax breaks for unreimbursed job expenses would be reinstated, with a twist. Under the bill, most unreimbursed job expenses would continue to be deductible as miscellaneous deductions on Schedule A. However, the provisions of Sen. Casey’s bill would also elevate union dues and expenses to an above-the-line deduction.
What’s an above-the-line deduction? To claim certain tax benefits, you typically have to itemize your deductions on a Schedule A. But you can claim some tax breaks even if you don’t itemize your deductions. Those are referred to as adjustments to income or, more commonly, above-the-line deductions, and are found on page 1 of your form 1040. For the 2017 tax year, they included teacher’s expenses, moving expenses, alimony, contributions to your IRA, the student loan deduction, and the tuition and fees deduction (a handful of those have been eliminated beginning in 2018).
In other words, the bill would bring back the tax break for unreimbursed job expenses and would allow a deduction for union dues and expenses even for taxpayers who do not itemize.
The bill has been read twice and referred to the Committee on Finance, where it currently sits.
What are the chances that it will get through? Govtrack.us predicts that the bill has a 1% chance of being passed as written. Senator Casey said, about his proposal:
The GOP tax bill was a partisan giveaway to the super wealthy and corporations, leaving the American worker behind. Although it is now signed into law, I will continue to fight to reform their scheme into something that is focused on working Americans. Reinstating the deductions for union dues and unreimbursed job expenses is just the start of what we need to do for the millions of Americans who were left out of the GOP tax bill.
