Table of Contents Contents
Since these costs are required to be paid, you may be wondering what happens with these amounts on your tax return. Well, with the Canadian tax system, most union dues are tax deductible. However, it’s important to know which dues you can claim and which you can’t. Let’s take a look.
How Union Dues Work
In Canada, union dues are payments that workers make that allow membership to trade unions as well as other types of unions. The purpose of union dues is to fund the different services that unions offer, which include collective bargaining and different activities and training. Since these services cost money, union dues are required to be paid.
Different Types of Unions in Canada
When it comes to unions there are a few different types of unions out of these. Each of these unions is for different types of employment and works in similar ways. Let’s take a look at them.
Craft Unions
Craft union was a name that was originally given to a union that represents workers in a particular occupation. Now, this type of union is referred to as a trade union. These trade unions or labour unions are meant for workers in a particular industry, and they can join without being employed. Often, these unions include those who are unemployed, students, individual workers, professionals, self-employed workers, apprentices and even those who are retired or unable to work anymore. An example of this would be the Iron Workers Union.
Industrial Unions
An industrial union is a type of trade union that allows those in the same industry to join, regardless of their trade. This not only allows for more workers to join but also allows for the different trades to negotiate for equality throughout the different trades and even industries. Even though UCFW is considered a private-sector union, it’s also an industrial union.
International Union
International unions are unions that run not only in one country but throughout different countries. In Canada, there are many different unions that also run in the United States and vice versa. One of these is CUPE.
Private Sector Unions
Private sector unions are unions that primarily represent workers who are employed in the private sector. These are commonly found in places like grocery stores, hotels, breweries and other private businesses. A popular example of a private sector union in Canada is UCFW.
Public Sector Unions
A public sector union is also considered to be a trade union. This type of union primarily represents employees who are in the public sector or governmental organizations. An example of this type of union in Canada is CUPE.
How Union Dues Are Calculated
When you pay dues, how much you pay is based on a rate decided by the union you’re a part of. Normally, this rate is the same for everyone, and you don’t pay more or less based on how much you work. That is, however, if your union chooses to go with the flat rate. Some other unions have a percentage rate that they charge that is based on what you earn. In this case, how often you work will affect the amount when you pay professional membership dues.
How Union Dues are Treated in Different Provinces
In Canada, union dues are treated the same throughout the country. No matter which province you choose to work in, the way these union dues are managed is the same. That said, each union has its own structure and rates, so the union and professional dues will be treated a little differently. How it’s done is based on each individual collective agreement. However, along with union dues, there are also dues for professional boards and other dues that may be charged separately.
Membership Fees and Taxes
In some cases, membership fees are another term for union dues. This means that they are tax deductible. In fact, there are many different types of professional dues that you’re able to claim. These union dues eligible include:
- Annual dues for a trade union or association of public servants.
- Professional membership dues with a professional organization are required to maintain professional status.
- Dues paid for insurance for professional liability coverage, including professional or malpractice liability insurance premiums.
- Dues required by provincial or territorial law to be paid to professional associations.
- Dues required by provincial or territorial law to be paid to advisory committees.
All in all, if you're looking to claim union dues, they must be from a professional status recognized by a Canadian, professional or foreign statute. In order to claim these on your annual income tax return, you will receive a T4 slip that includes these amounts and what you should claim. You’ll notice this amount will be placed in BOX 44. However, you may also receive a second statement from the person who paid the dues. It’s important that you only claim this amount once because claiming it twice can result in penalty taxes, interest owing, and an inaccurate tax return.
Dues You’re Unable To Claim On Your Taxes
While there are plenty of professional membership dues listed above that you’re able to claim, there are also union dues that you’re unable to claim. These different dues include:
- Licenses
- Pension Plan Membership Dues
- Special Assessments
- Initiation Fees
- Memberships to Voluntary Associations
You also are unable to claim any charges that aren’t related to the company's operating costs. You also aren’t able to claim any membership dues for which the company reimburses you, not that the employer pays. The only exception to this is if you’re the primary beneficiary and your employer covers the fees paid. In this case, you’re then able to claim a taxable benefit.
When Union Dues Are Deducted
In most cases, union dues are deducted directly from your paycheque every payday. These amounts will be deducted at the agreed-upon rate at the agreed-upon times. It’s important to note that these amounts will also be deducted from your gross employment income every pay period because tax isn’t paid on these amounts.
The Cost of Union Dues
As we mentioned, every union charges different rates. You also have to consider whether you’re part of a small private union or a large public union. It’s likely a large public union will have slightly higher rates than the smaller ones. No matter which union you’re a part of, though, the average rate is 1.5% of your wages. For most employees, your union wages total up to less than $800 per year.
How to Claim These Dues
When it comes to claiming union dues on your taxes, it’s actually pretty simple. You’ll receive tax forms letting you know how much in union dues you paid for the tax year. In order to claim this, all you need to do is enter the amount on Line 21200 on your income tax return that you file with the Canada Revenue Agency. To get the most accuracy, you shouldn’t claim dues from a previous tax year same with professional dues, no matter your professional standing.
When it comes to union dues, claiming them can be a valuable deduction. These eligible dues can allow you to pay less tax (gst/hst). However, you do have to make sure these fees meet the specific criteria before you claim them.
Why People Choose to Join Unions
Without the placement of a union, it can be easy for an employer to make promises that they never keep. It can also be difficult to get a raise when a union isn’t involved. This is because all decisions are then left up to an employer. Being part of a union allows you access to benefits, better pay, regular wage increases and work-life balance. Unions can even ensure you work a minimum amount of hours and shifts that work for you.
The reason that this stuff is found more commonly with unions than other employers is because unions create better bargaining power. You also have a voice for you when it comes to unjust management and harassment. They also prioritize training, scholarships and free online courses. Not only do these things make for a better workplace, but they also allow for job security and the ability to expand your professional horizons.
Disadvantages to Being Part of a Union
You might be surprised to learn this, but there aren’t really any disadvantages to being part of a union. In fact, it’s shown that those who are part of a union earn $5 to $6 more per year in taxable income than those who aren’t. Those who are in unions are also more likely to have health benefits, pensions and a better quality of life since work-life balance is a priority.
Final Thoughts
In Canada, unions help workers gain access to fair and healthy workplaces. However, in turn, for access to these workplaces, union dues are charged. These union dues can then be claimed as a tax deduction on your annual income tax return. However, not all employee’s professional dues are tax deductible, so it’s important to know the difference.
For union dues that are tax-deductible, tax slips are sent out at tax time to allow you to claim these amounts. However, it’s possible to get more than one tax slip, so make sure you claim only the amount once. It could negatively affect your tax return if you don’t. If you’re unsure exactly how to claim these amounts, then accountants or tax experts should be able to give you the best tax advice.
