{"id":163,"date":"2024-08-22T19:34:26","date_gmt":"2024-08-22T19:34:26","guid":{"rendered":"https:\/\/s37407.p1377.sites.pressdns.com\/homepay\/how-to-budget-and-manage-taxes-in-a-nanny-share\/"},"modified":"2024-08-22T19:34:26","modified_gmt":"2024-08-22T19:34:26","slug":"nanny-share-payroll-taxes","status":"publish","type":"post","link":"https:\/\/www.care.com\/hp\/nanny-share-payroll-taxes\/","title":{"rendered":"How to budget and manage taxes in a nanny share"},"content":{"rendered":"\n<p>To afford professional, in-home child care, many families opt for a <a href=\"https:\/\/www.care.com\/c\/guides\/nanny-shares-guide\/\">nanny share<\/a>, or care share, so they can split the cost with another family. These arrangements\u00a0have risen in popularity over the past few years because it\u2019s a more budget-friendly option for families\u00a0and typically provides higher pay for the nanny. Keep reading to learn more about:<\/p>\n\n\n\n<ul>\n<li><u><a href=\"#nspayroll\">How payroll works in a nanny share<\/a><\/u><\/li>\n\n\n\n<li><u><a href=\"#nstaxes\">How taxes should be managed in a nanny share<\/a><\/u><\/li>\n\n\n\n<li><u><a href=\"#nstaxbreaks\">Tax breaks available to nanny share families<\/a><\/u><br>&nbsp;<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large is-resized\"><a href=\"https:\/\/www.care.com\/homepay\"><img decoding=\"async\" width=\"1024\" height=\"386\" src=\"https:\/\/www.care.com\/hp\/wp-content\/uploads\/sites\/3\/2023\/06\/HomePayAd-NannyTaxes-1024x386.png\" alt=\"\" class=\"wp-image-2137\" style=\"width:-84px;height:-31px\" srcset=\"https:\/\/www.care.com\/hp\/wp-content\/uploads\/sites\/3\/2023\/06\/HomePayAd-NannyTaxes-1024x386.png 1024w, https:\/\/www.care.com\/hp\/wp-content\/uploads\/sites\/3\/2023\/06\/HomePayAd-NannyTaxes-300x113.png 300w, https:\/\/www.care.com\/hp\/wp-content\/uploads\/sites\/3\/2023\/06\/HomePayAd-NannyTaxes-768x289.png 768w, https:\/\/www.care.com\/hp\/wp-content\/uploads\/sites\/3\/2023\/06\/HomePayAd-NannyTaxes-1536x579.png 1536w, https:\/\/www.care.com\/hp\/wp-content\/uploads\/sites\/3\/2023\/06\/HomePayAd-NannyTaxes-1920x724.png 1920w, https:\/\/www.care.com\/hp\/wp-content\/uploads\/sites\/3\/2023\/06\/HomePayAd-NannyTaxes.png 2038w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-should-payroll-nbsp-be-handled-in-a-nanny-share\"><strong><a id=\"nspayroll\" name=\"nspayroll\"><\/a>How should payroll&nbsp;be handled in a nanny share?<\/strong><\/h2>\n\n\n\n<p>In an optimal situation, a nanny working in a nanny share will care for each family\u2019s kids at the same time for every hour they work. In this scenario, it\u2019s simple to split the nanny\u2019s hourly rate in half and know how much each family owes every week. As long as the nanny is earning at least minimum wage for every hour they work, both families are in compliance.<\/p>\n\n\n\n<p>\u201cWhere nanny shares get complicated is when the nanny is only needed for one family for a few extra hours or even a full day\u2019s work,\u201d says Tom Breedlove, Sr. Director of <a href=\"https:\/\/www.care.com\/homepay\">Care HomePay<\/a>. \u201cIn this situation, the family whose children are being cared for needs to make sure they\u2019re paying at least minimum wage for the hours the nanny is working solely for them \u2014 even if their typical contribution toward the nanny share is below minimum wage.\u201d<\/p>\n\n\n\n<p>The easiest way around this problem is for each family to contribute at least the minimum wage rate in their state to the nanny share. For instance, the <a href=\"https:\/\/www.care.com\/hp\/texas-nanny-taxes\/\">minimum wage in Texas<\/a> is $7.25 per hour so if the nanny is paid at least $14.50 per hour, each family will be in compliance with federal and state minimum wage laws regardless of the care arrangement for the day.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-do-taxes-work-in-a-nanny-share\"><strong><a id=\"nstaxes\" name=\"nstaxes\"><\/a>How do taxes work in a nanny share?<\/strong><\/h2>\n\n\n\n<p>In a nanny share, the IRS views each family as a separate household employer, even if the care is provided in only one family\u2019s home. Each family is required to establish themselves as a household employer with the IRS and the state by applying for federal and state tax identification numbers.<\/p>\n\n\n\n<p>The families should pay the nanny separately, withholding the appropriate taxes each pay period based on their share of the nanny\u2019s wages. Both families should also remit payroll taxes to the IRS and state agencies on their portion of the nanny\u2019s pay.<\/p>\n\n\n\n<p>Although it may seem administratively easier to have one family handle all the tax withholdings and remittance, this creates a risk for the family who is not registered as a household employer. For example, if the nanny applies for <a href=\"https:\/\/www.care.com\/hp\/unemployment-insurance\">unemployment insurance benefits<\/a>, they\u2019ll list both families as employers and the state will only have a record of one family paying taxes.<\/p>\n\n\n\n<p class=\"has-text-align-left\">Read more about setting up a <a href=\"https:\/\/www.care.com\/hp\/7-steps-for-creating-a-nanny-payroll-account\">payroll account for a nanny<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-tax-breaks-are-available-for-families-in-a-nanny-share\"><strong><a id=\"nstaxbreaks\" name=\"nstaxbreaks\"><\/a>What tax breaks are available for families in a nanny share?<\/strong><\/h2>\n\n\n\n<p>The good news is that while you pay less in a nanny share, you get the same tax breaks as if you weren\u2019t splitting costs. When each family correctly handles their household employer tax obligations on their portion of the nanny share, both families may be eligible for <a href=\"https:\/\/www.care.com\/hp\/nanny-tax-breaks-and-deductions\">child care tax breaks<\/a>.<\/p>\n\n\n\n<p>Remember that both families are splitting the cost of the nanny&#8217;s wages and the subsequent tax liability, but they don\u2019t have to split the tax breaks. This is because each family is a separate employer and may use a <a href=\"https:\/\/www.care.com\/hp\/use-a-dependent-care-account-to-lower-your-2021-in-home-care-expenses\">Dependent Care Account<\/a> and\/or the <a href=\"https:\/\/www.care.com\/hp\/use-the-child-care-tax-credit-to-save-on-your-2021-taxes\">Child and Dependent Care Tax Credit<\/a>. These tax breaks result in approximately $5,000 in tax savings, which is likely to offset&nbsp;each family\u2019s household employment taxes.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-a-budget-scenario-to-highlight-tax-breaks-in-a-nanny-share\"><strong>A budget scenario to highlight tax breaks in a nanny share<\/strong><\/h2>\n\n\n\n<p>Let\u2019s use the example above of a family in a nanny share in Texas where the nanny earns $14.50\/hour for 40 hours of work per week, split between two families. Each family has two kids and both can utilize the tax breaks just discussed. Here\u2019s an approximation of what each family\u2019s budget would look like:<\/p>\n\n\n\n<figure class=\"wp-block-table aligncenter is-style-stripes\"><table><tbody><tr><td>&nbsp;<\/td><td><strong>Weekly Cost<\/strong><\/td><td><strong>Annual Cost<\/strong><\/td><\/tr><tr><td>Gross wages for the nanny<\/td><td>$290.00<\/td><td>$15,080.00<\/td><\/tr><tr><td>Household employment taxes<\/td><td>$27.67<\/td><td>$1,438.84<\/td><\/tr><tr><td>Cost before tax breaks<\/td><td><strong>$317.67<\/strong><\/td><td><strong>$16,518.84<\/strong><\/td><\/tr><tr><td>Savings from tax breaks<\/td><td>-$96.15<\/td><td>-$5,000.00<\/td><\/tr><tr><td>Total cost after tax breaks<\/td><td><strong>$221.52<\/strong><\/td><td><strong>$11,318.84<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>As you can see, not only do the tax breaks offset the family\u2019s tax liability, but they actually save nearly $4,000! If you\u2019d like to run your own budgeting scenario, use HomePay\u2019s <a href=\"https:\/\/www.care.com\/homepay\/nanny-tax-calculator\" target=\"_blank\" rel=\"noreferrer noopener\">employer budget calculator<\/a> for an estimate of your tax costs and potential savings.<\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><strong>Next Steps:<\/strong><\/p>\n\n\n\n<ul>\n<li><p dir=\"ltr\"><a href=\"https:\/\/www.care.com\/c\/guides\/child-care-guide\/nanny-shares-guide\/\">Learn more about managing a nanny in a nanny share<\/a><\/p><\/li>\n\n\n\n<li><p dir=\"ltr\"><a href=\"https:\/\/www.care.com\/hp\/1099-vs-employee-why-the-difference-matters-when-you-hire-a-caregiver\">Read why nannies are household employees, not independent contractors<\/a><\/p><\/li>\n\n\n\n<li><p dir=\"ltr\"><a href=\"https:\/\/www.care.com\/hp\/nanny-tax-guide\">Review the tax and payroll&nbsp;rules for hiring a nanny<\/a><\/p><\/li>\n<\/ul>\n\n\n\n<p><a id=\"getstarted\" name=\"getstarted\"><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn the rules and tax advantages of a nanny share or care share arrangement from the nanny tax experts at HomePay.<\/p>\n","protected":false},"author":1301,"featured_media":1016,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"enable_toc":false,"care_post_updated_flag":false,"care_updated_date":"","last_update":"2024-08-22","view_count":8363,"footnotes":""},"categories":[1],"tags":[],"member-type":[2],"vertical":[361,3],"platform":[11],"acf":[],"created":"2016-12-21","_links":{"self":[{"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/posts\/163"}],"collection":[{"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/users\/1301"}],"replies":[{"embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/comments?post=163"}],"version-history":[{"count":4,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/posts\/163\/revisions"}],"predecessor-version":[{"id":3079,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/posts\/163\/revisions\/3079"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/media\/1016"}],"wp:attachment":[{"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/media?parent=163"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/categories?post=163"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/tags?post=163"},{"taxonomy":"member-type","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/member-type?post=163"},{"taxonomy":"vertical","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/vertical?post=163"},{"taxonomy":"platform","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/platform?post=163"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}