Taxes 2023: Changes To Note if You Have Household Employees

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If you hire nannies or other household employees, you need to familiarize yourself with some of the tax changes for 2023. While not every change might apply to your personal situation, it helps to brush up on the rules just in case.

Here’s a look at what’s new for 2023:

Payroll Taxes

Federal payroll taxes such as for Social Security and Medicare apply when you pay $2,600 or more in wages to household employees in 2023, according to the IRS. This threshold is up from $2,400 last year.

Qualified Parking Exclusion and Commuter Transit Benefit

For 2023, the monthly exclusion for qualified parking is $300 and the monthly exclusion for commuter highway vehicle transportation and transit passes is also $300. Both are up from $280 in 2022. These non-taxable benefits can be included as part of a household employee’s pay, according to HomePay.

Sick and Family Leave

If you pay household employees qualified sick and family leave wages in 2023 for leave taken after March 31, 2020 and before October 1, 2021, you can claim a credit for the wages in 2023.

Minimum Wage

Although the federal minimum wage of $7.25 an hour has not increased since 2009, a number of states have higher minimums, with many raising those rates this year. Higher minimum wages could result in changes to payroll taxes for household employees.

Here are the states that have higher minimum wages in 2023: Arizona, California, Colorado, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, New York, South Dakota, Virginia and Washington. You can check out HomePay’s state-by-state guides to make sure you are in compliance with the new pay rates.

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