The IRS an increase to the standard mileage reimbursement rate to take effect January 1st, 2013. The new rate increased from 55.5¢ (2012) to 56.5¢. For compliant household employers preparing to give their nannies a W-2 this tax season, this is imperative information.
The IRS mileage reimbursement rate is commonly used by household employers to reimburse their household employee for the 'business use' of his/her personal vehicle; it is intended to cover gas, maintenance and depreciation of the nanny’s vehicle when used for work related errands and/or children transportation.
Families with young children generally understand the nanny’s car could suffer some extra deterioration when used to transport young children. Many will also pay for an annual 'detailing' of the nanny's vehicle if it is used frequently.
2014 UPDATEWhile mileage reimbursement and commuter transit benefits are scheduled to decrease January 1, 2014, other nanny tax numbers will increase.
The 2014 Nanny Tax round-up includes:
- Mileage reimbursement decreases a half a cent a mile from $0.565 to $0.56.
- Communter transit benefits - a tax free way employers can subsidize their employee's mass transit commuting expenses - will decrease from $245 to $130 per month. According to the Washington Post, there is bi-partisan support to maintain 2013 levels, but action to extend this benefit will not be taken up until the spring.
- In 2014 a family will have a household employment tax obligation when they pay $1900 or more to a household employe in the calendar year. This is an increase from the 2013 threshold of $1800.
- Contribution limits for most household employee's Roth IRA or traditional IRA is $5,500, plus an extra 'catch-up' $1,000 for those 50 or older in 2014.
- Many state minimum wage levels will increase on January 1, 2014. Nannies and most household employees are covered under minimum wage and the higher of the Federal or local minimum applies.
- Hawaii and California have new Domestic Workers' Bill of Rights legislation. California's vill goes into effect January 1, 2014, Hawaii's took effect the summer of 2013.