How to Properly Reimburse Your Nanny for Gas and Mileage Costs

If your nanny provides transportation for your children—whether it’s school drop-offs, sports practices, or playdates—it’s important to fairly reimburse them for the costs of using their vehicle. Proper reimbursement not only builds trust and goodwill but also keeps you compliant with tax and labor regulations. Here’s a straightforward guide to help you navigate mileage reimbursement for your nanny.

Family Car vs. Nanny’s Car: What’s the Difference?

Before diving into reimbursements, clarify which vehicle your nanny will use:

• Family Car:
  If your nanny uses a car you provide, there’s no need to reimburse for mileage. You will, however, need to make sure a plan is in place to keep the vehicle full of gas. You might fill up the car each weekend to prepare for the upcoming week, provide petty cash or a credit card for gas purchases, or have your nanny submit receipts for tax-free reimbursement.

Tip: Make sure your nanny is listed as an insured driver on your family’s auto insurance policy. A quick call to your insurer will help you set this up.

• Nanny’s Personal Car:
  While not required under Federal law, if your nanny uses their own car for work, reimbursement is considered standard practice. This covers gas, wear and tear, maintenance, and other costs associated with on-the-job driving. Some states, such as California, Illinois, Massachusetts, and Washington, D.C., do require you to reimburse your employee for mileage for on-the-job driving.

Tip: Ensure your nanny reaches out to their insurer to let them know she will occasionally use her car for work. Most insurance companies will not require additional coverage as driving is not the primary focus of a nanny position. If the insurer requires a change in coverage, which will come at an extra cost, it is customary for the family to reimburse the nanny for this additional expense.

Mileage Reimbursement Made Easy

The IRS sets a standard mileage reimbursement rate each year to cover costs associated with using a personal vehicle for work. This rate includes gas, insurance, maintenance, and depreciation, eliminating the need to calculate each cost individually. For 2024, the rate is $0.67 per mile (check for updates annually).

Here’s how to handle mileage reimbursement:

1. Track the Miles:
   Your nanny should keep a log of miles driven for work-related tasks. A mileage tracking app, shared spreadsheet, or manual record will work. Your employee’s commute to and from work isn’t reimbursable tax-free—only miles driven during working hours.
2. Calculate the Reimbursement:
   Multiply the total work-related miles by the current IRS mileage rate. For example:
   • If your nanny drives 60 miles in a week, the calculation would be:
     60 miles × $0.67 = $40.20 reimbursement.
3. Pay Promptly:
   Add the mileage reimbursement as a separate line item in your nanny’s paycheck. Since it’s not considered taxable income, neither you nor your nanny will owe taxes on this amount (as long as you don’t exceed the IRS rate).

Best Practices for Using Your Nanny’s Car

If your nanny uses their own vehicle, go the extra mile to ensure fairness and minimize wear and tear:

• Plan for Accidents:
  Agree ahead of time on how to handle deductible payments if there’s an accident during work-related driving. Many families choose to take full responsibility.
• Care for Their Car:
  Offer periodic car detailing as a thank-you gesture, and let your nanny set boundaries, such as no eating or drinking in the car.

Put It in Writing

Clear communication is key to avoiding misunderstandings. Include your mileage reimbursement policy in your nanny work agreement. Specify:

• The reimbursement method (e.g., IRS rate).
• How mileage will be tracked and paid.
• Any additional perks or support for using their car.

Reimbursement Reflects Respect

Reimbursing your nanny for mileage and gas isn’t just a logistical matter—it’s a way to demonstrate respect for their time, effort, and the resources they dedicate to your family. By following these best practices, you’ll ensure your nanny feels valued while staying compliant with tax and labor laws.

Need help managing nanny payroll and ensuring compliance? HomeWork Solutions has been a trusted partner for household employers since 1993. Contact us today for expert support and stress-free payroll solutions.