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Deduct your state unemployment and disability contributions


Deduct your state unemployment and disability contributions

Residents of seven states have to look out for this.

Robert D. Flach
by Robert D. Flach, MainStreet contributor

NEW YORK (MainStreet) — Most taxpayers are aware that state and local income taxes are deductible if you can itemize on Schedule A.

But many fail to claim a deduction for a special state payroll tax.

If you live and/or work in Alaska, California, New Jersey, New York, Pennsylvania, Rhode Island, Washington or West Virginia, your employer is probably withholding mandatory contributions to a state disability, family leave, unemployment and/or supplemental workers’ compensation fund from your paycheck.

You can deduct these mandatory employee contributions on Schedule A as a tax.

These withholdings are often listed in Box 14 of your W-2.

These employee contributions are considered a form of state and local income tax, so if you elect to deduct state and local sales tax instead of state and local income tax you cannot deduct your contributions to these state funds.

In most states, as is the case with New Jersey withholdings, there is a statutory maximum contribution for each fund. If you had more than one employer during the year you may have had more than the maximum amount of contributions withheld and could be entitled to a refund of the excess contributions. In New Jersey you can claim a refund of excess family leave, disability and/or unemployment withholding on the state resident or nonresident income tax return.