Nanny Tax Threshold & Gas Mileage for 2023

The Internal Revenue Service or IRS has increased the standard mileage rates and tax threshold for 2023. Starting January 1, 2023, the mileage reimbursement rates have increased to 65.5 cents per mile, an increase of 3 cents from the mid-year increase in 2022. This reimbursement is not taxable. Mileage reimbursement supports household employees or nannies who drive for business use during the workday. It’s best practice to pay your nanny for mileage. If a nanny is unable to use a family car for transportation then Peace of Mind Nannies highly recommends a mileage reimbursement benefit for nannies using their own car for trips to community events or before/after school pick up and drop offs. In Massachusetts, it is required to reimburse an employee for the miles they drive in their own vehicle while working. To note, a nanny’s commute to and from your home isn’t eligible for mileage reimbursement.

The Social Security Administration have increased the nanny tax threshold from $2,400 to $2,600 for calendar year 2023. What does this mean? If a household employee or nanny earns $2,600 or more in cash wages in 2023, Social Security and Medicare taxes (or FICA taxes) must be paid by the family and the worker. In most situations, a short- or long-term part time or full time nanny will exceed this threshold in a year. If a household employee is paid $1,000 or more in any calendar quarter, the family needs to pay federal unemployment taxes as well. As a result, most nannies must be paid legally on the books with the appropriate tax withheld by the employer. Peace of Mind Nannies requires families using our services to pay nannies legally. I understand it may sound overwhelming but don’t worry. We will recommend payroll companies that are industry specialists to best support families in remaining tax compliant.