The Social Security Administration has released the 2023 earnings threshold for employers of nannies and other household employees withholding FICA (Social Security and Medicare taxes). Unlike many industries, for household employment, FICA taxes are not withheld until the earnings threshold is met. Although the threshold represents the minimum that an employee must earn for FICA withholdings, it is important to note that once the threshold is met, taxes are owed on all wages (back to dollar 1). For 2023, if a household employee earns $2600 or more in cash wages, FICA taxes must be withheld . This is an increase of $200 from 2022.
Employees pay 7.65% for their portion of FICA, and employers match the 7.65% contribution.
The Social Security tax pays for old-age, survivors, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance.
Do you have more questions about the tax requirements for having a nanny? Visit https://www.nannychex.com/tax-information-faq/