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.

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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.

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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.

Learn: What Is the Standard Deduction for People Over 65 in 2023?
More: The IRS Has Refunded $15.7B as of Feb. 3 — Here’s How Much the Average Taxpayer Is Getting Back

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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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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