Updated December 2023
Every year HomeWork Solutions prepares a summary of new or updated household employment tax laws and benefit information.
HOUSEHOLD EMPLOYEE 2024 WAGE BASE:
The IRS annually reviews, and adjusts as necessary, the wage payment threshold that obligates a family to pay Social Security and Medicare taxes. These tax withholdings are reported annually on a W-2. This threshold will increase to $2,700 for 2024.
MINIMUM WAGE INCREASES:
Minimum wage under federal law remains at $7.25/hr, but states and local governments continue to set and increase minimum wage requirements at the local level. Be sure you check out minimum wage and other requirements in your state before you negotiate a contract with your employee. Consider how offering a total compensation package including benefits may help both you and your employee minimize taxes.
TAX ADVANTAGED HEALTHCARE OPTIONS:
The IRS allows an employer to reimburse healthcare costs to their employee tax free via two Healthcare Reimbursement plans, subject to program guidelines. Qualified Small Employer Healthcare Reimbursement Arrangement(QSEHRA) is capped at $6,150 for individuals or $12,450 for a family in 2024. The Individual Coverage Health Reimbursement Arrangement(ICHRA) has no cap, but employers must ensure that their plan meets affordability rules. For either HRA, the employer must have a written plan (we have you covered there) and the amount of reimbursement offered must be noted on the W-2 form to remain tax free.
> Visit our partners at Take Command Health if you are interested in HRA Administration
TAX FREE TRANSPORTATION FRINGE BENEFIT
Employers may provide a mass transit tax free reimbursement of up to $315 monthly to their household employee, or a monthly reimbursement of up to $315 for parking. Both amounts have been increased by 15 from the prior year.
PAID SICK AND FAMILY LEAVE LAWS:
Eighteen states plus Washington, DC now require some form of paid sick leave, safe leave, or family medical leave. Some states have created Paid Family and Medical Leave programs funded by payroll taxes, while others have have advanced regulations that offer PAID leave to employees of smaller employers. In general these laws allow time off to deal with both the employee’s illness and medical appointments, and those of family members. Most laws require employees to make a reasonable effort to schedule paid leave so as not to unduly disrupt the operations of the employer. In other words, notice of medical appointments should be ample and, when possible, scheduled close to the beginning or end of the day. Read more about paid leave laws in your state.
Federal mandates for paid leave related to the Coronavirus Pandemic have expired, but many states now require paid or unpaid leave for employees to get tested, vaccinated, or to quarantine in the event of illness or exposure. Practically speaking, offering this leave is good for household employers, as employees without paid leave are more likely to come to work while ill and to risk getting others sick.
Changes of note for 2024 include the following
Starting on January 1, 2024, employers must generally provide 5 days or 40 hours of paid sick leave to their employees in California.
Beginning January 1, 2024, the required accrual rate is one hour of paid leave for every 40 worked. Employers can cap accrued time off at 40 hours per year. Employees can use their earned time off beginning March 31, 2024, or 90 days following the start of their employment.
Beginning January 1, 2024, employers must offer employees who work in Minnesota 48 hours of paid time off per year. Employers can front load this paid leave at the beginning of the year, or employees can immediately begin accruing leave at a rate of one hour per 30 hours worked.
2024 MILEAGE REIMBURSEMENT
The 2024 IRS mileage reimbursement rate has increased to 67 cents per mile, up 1.5 cents from the prior year. Business use for a household employee may include running errands for the family and transporting children or a senior to appointments, activities and school. Routine commuting between your home and place of work is NOT considered business use, and is not typically reimbursed. If any commuting is reimbursed, this is considered taxable wages. The IRS reminds taxpayers "It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses." HWS recommends that mileage reimbursement be included as part of the employee's work agreement when an employee's personal vehicle is used for work purposes.
WRITTEN WORK AGREEMENT:
An increasing number of states and cities are requiring household employers to provide a written employment agreement at the time of hire outlining wages and benefits in English, and a language the household employee understands, if not English. Many other states and localities require that employers disclose in writing pay rates, either via a separate written notice or by outlining on a pay stub. Be sure to visit our tip sheets for household employment rules in your state.
SALARY HISTORY BANS AND SALARY POSTING REQUIREMENTS:
Currently at least 21 states and 21 local governments have salary history bans in place. To find out if you are covered by a salary history ban check here.
Several states also require employers to post salary ranges with any listed position to provide transparency and prevent discrimination in wage negotiations. You should always post your expected salary range to ensure that candidates who apply are a good match for the skills required and compensation offered.
Compliance with legal payroll tax laws is time consuming for household employers. Find out why so many families outsource this activity to HomeWork Solutions' household payroll tax compliance service.