But in the eyes of the IRS there is a technical definition and not all nannies are considered household employees. Generally, paying families can use up to $5,000 in pre-tax dollars towards this expense.Ĭalling your nanny a household worker or even employee might seem overly formal. In most cases, you can also use your Flexible Spending Accounts (FSAs) to cover the childcare expenses associated with the household employee. Because you’re paying for child care you’re eligible for the Child Care Tax Credit, which is valued at as high as 35% of $3,000 in qualifying expenses for one kid and $6,000 for two or more kids. The household employer benefits from a tax standpoint, too.In addition, the employee can access long-term benefits like unemployment benefits, Social Security income, Medicare, and potentially even affordable and subsidized health insurance costs through the Affordable Care Act. If you apply for a loan, want to buy a home, lease a car, rent an apartment, or get a new credit card, it’s crucial to have a legitimate job on the record. The employee benefits from having employment on record.Why bother with nanny tax? Benefits for all in household employmentīelieve it or not, it’s in both parties’ favor to report nanny taxes: Read on as we detail what you need to know and do from a tax standpoint. Getting your arms around nanny tax rules is essential for both the employer and the nanny. Essentially, it the federal income taxes families pay for household employees who make a certain amount of money.

Net nanny refund policy