Tax Changes -

New Nanny Tax changes for 2024

Nanny tax threshold changes

In 2024 paying employment taxes becomes required by law once a babysitter, nanny, or other household employee earns $2,700 in a calendar year. This is an increase of $100 from $2,600 in 2023.

Income tax changes

Income tax withholding on a nanny’s behalf is still not required for household employers. But if you and your nanny have agreed to this, note that federal income tax bracket brackets have been updated in 2024.

The 7 possible rates remain the same, but the amount of income to reach each higher rate has increased, resulting in less income taxes to be withheld for those on the cusp of a bracket.

Some states also have also adjusted their state income tax brackets and deductions.

Change to IRS mileage rate

In 2024, the IRS mileage reimbursement rate is up 1.5 cents to 67 cents/mile. For a nanny or other household employee, compensating for miles driven while on the job is not a federal requirement. However, some states such as California, Illinois, and Massachusetts do mandate reimbursement for if driving the employees vehicle is required on the job. In other states, mileage reimbursement can also be offered as a perk to your nanny if you choose.

Family Leave updates

Massachusetts, New York and Washington state have family leave tax updates. Contribution rates for MA Family Leave, NY Paid Family Leave, and WA Paid Family & Medical Leave have been adjusted for the new year.

Filing for 2023

These changes go into effect started in wages paid in 2024. For 2023’s tax return, the 2023 brackets will continue to be used. And if you have a nanny or other household employee, you would still create and file a W-2 for each employee by January 31, 2024.

What hasn’t changed:

The rates of Medicare and Social Security taxes remain unchanged from last year.
It is still tax evasion to avoid responsibilities if you do meet the requirements to be considered a household employer.

Download the Paycheck Nanny app for iOS to automatically calculate taxes and withholdings, track time, create & email pay statements.

Does the WA CARES Fund apply to my nanny?

The WA Cares Fund is intended for all employees, including household employees, in the state of Washington to contribute to support the access of long term care when needed.

WA Cares Fund delayed

The Fund was scheduled to start collection on January 1, 2022. However, this has now been postponed until at least April of 2022 while updates to the plan are being made.

According to wacaresfund.wa.gov:

The Legislature and Governor Inslee have announced plans to change and improve the WA Cares Fund during the 2022 legislative session, which is scheduled to conclude in March 2022. Per direction from the Governor, ESD will not collect premiums from employers until April 2022 or until further direction is received.

Is my nanny or babysitter a household employee?

A nanny or babysitter who will be paid $2,400 or more in 2022 is typically considered a household employee, for which other taxes will be required.

For more information on your household employer responsibilities, download Paycheck Nanny from the Google Play store for Android devices or the App Store for iOS devices. This will automatically calculate taxes and withholdings, track time, create & email pay statements and guide you through your tax responsibilities.

Does Trump’s payroll tax deferral affect my nanny’s paycheck?

You may have heard that President Trump issued an Executive Order allowing deferral of employee payroll tax from Sept 1, 2020 through Dec 31, 2020. What does this payroll tax deferral mean to your nanny’s paycheck?

The key point about this bill is currently it is only an optional deferral of employee portion of payroll tax (which is the 6.2% total withheld from your employee’s paycheck for Social Security and Medicare).

So as it stands, if you change your nanny’s pay so this amount is not withheld, your nanny will see a small increase in take home pay for the remainder of the year, but will then have to re-pay that increase back by April 30, 2021.

And according the IRS, you as the household employer are responsible for collecting the deferred amount back from the employee between January 1, 2021 and April 30, 2021. If you are unable to collect that amount from the employee, you as the employer would still be responsible for paying it back by or penalties will accrue starting May 1, 2021.

President Trump is hoping that further legislation occurs to make this deferral re-payment forgiven, but that has not occurred yet.

If you and your nanny do decide to stop withholding payroll tax starting September 1, you can do this via the option under Withholdings in the iOS version or Android version of the Paycheck Nanny app of whether to “Withhold FICA”. Turning this option off would enable payroll tax deferral.

For more information on the IRS guidance on this employee payroll tax deferral, see https://www.irs.gov/pub/irs-drop/n-20-65.pdf.