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.