Nanny Payroll & Tax Strategies to Save You Money
By Stephanie Breedlove of Breedlove & Associates
Last summer, we shared some money-saving tips for caregivers and their families. Since saving money is still fairly popular, we thought we’d use this edition of Financial Friday as an update and reminder. Being savvy in this area can save you and your family thousands of dollars.
Whether you’re in the middle of an employment relationship or about to start a new one, keep these money-saving tips in mind:
Tip #1: Non-Taxable Compensation
There are several forms of compensation that are considered “non-taxable,” meaning neither you nor your family would have to pay any taxes on this portion of your compensation. The tax-advantaged expense categories are:
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Health insurance premiums
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Tuition & books at an accredited college or university (up to $5,250 per year)
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Public transportation to and from your job (up to $125 per month)
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Parking at your jobsite (up to $240 per month)
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Cell phone service plans
You and your employer may be able to structure (or re-structure) your payroll to take advantage of one or more of these expenses as “non-taxable compensation” – saving both of you a substantial amount of money.
Note: These tax-advantaged compensation strategies need to be handled appropriately; please have your employer call us or another household employment tax professional for assistance.
Tip #2: Tax Breaks for Your Family
Your employer is also eligible to receive tax breaks for childcare-related expenses through a Flexible Spending Account and/or the Childcare Tax Credit. These tax breaks can save your family up to $2,500 per year. We have a free Employer Budget Calculator or they are welcome to call us.
If the family you work for contributes at least half of your health insurance premium, they are also entitled to the Health Insurance Tax Credit for Small Employers. This tax credit is worth up to 35% of the employer’s health insurance contribution.
Tip #3: Tax Breaks for You
Not many people are aware of the Earned Income Tax Credit (EITC), a federal* program designed to assist hard-working Americans radically lower their income tax bill. You may qualify if you have an Adjusted Gross Income of less than:
- $45,060 ($50,270 married filing jointly) with 3 or more qualifying children;
- $41,952 ($47,162 married filing jointly) with 2 qualifying children;
- $36,920 ($42,130 married filing jointly) with 1 qualifying child; or
- $13,980 ($19,190 married filing jointly) with no qualifying children.
Those who qualify can get a “refundable tax credit”** of up to:
- $5,891 with 3 or more qualifying children;
- $5,236 with 2 qualifying children;
- $3,169 with 1 qualifying child; and
- $475 with no qualifying children.
*In addition to the federal program, 22 states have similar programs to reduce your state income tax bill.
**Since the EITC is a “refundable tax credit,” it is possible to receive a refund that is greater than the amount of taxes you paid in during the year.
For more information on the Earned Income Tax Credit and how to apply, visit http://www.irs.gov/individuals/article/0,,id=96406,00.html
If we can help you or your employer take advantage of any of these money-saving tips, please call 888-273-3356 or visit www.myBreedlove.com. We’re here to help.