Most families refer to the IRS guidelines to calculate mileage reimbursement rate for the business use of her personal vehicle. This will include such things as transporting your loved ones to/from activities, errands, shopping, etc. It does not include the employee’s commuting mileage to/from their home to their place of employment. Employee mileage reimbursement is tax free except for values that exceed the IRS rates.
Mileage Pad makes a free app available to help employees accurately track business mileage for employer reimbursement.
2024 rate: 67 cents per mile
The standard mileage rate is established by the IRS, and the nontaxable amount that is used by employers to reimburse employees for the business use of their personal automobiles. This is the reimbursement rate most families use to reimburse the nanny, caregiver, or housekeeper who uses her personal vehicle to perform her job. The IRS mileage reimbursement rate typically adjusts once per year, with announcements made in November for the next year’s rate.
Insurance Benefits: The IRS will allow the employer to pay the cost of an medical or health insurance plan for employees, including an employee’s spouse and dependents. Depending on circumstances the premium payments can be excluded from wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding.
Effective January 1, 2024 the maximum tax free reimbursement for an employee’s individual medical insurance premium is $6,150 per year and for a family plan $12,450 annually. (LEARN MORE)
Social Security Wage Base: The Social Security wage base for 2024 is $168,600. Employers are taxed based on the employee’s gross pay at 6.2% for Social Security taxes up to the wage base, and 1.45% for Medicare (which has no wage base).
Qualified Transportation Fringe Benefit: $315 per month for mass/public transit plans, and $315 for parking (2024).
See a related article about transportation allowance.
INTERNAL REVENUE SERVICE: MORE INFORMATION
Educational Assistance: The annual tax free amount for employer-provided educational assistance is $5,250 for 2024 and applies to undergraduate and graduate-level course work. According to the IRS, “Employers offering tax-free educational assistance are required to have a written plan describing the benefit and the terms under which it is available.” (Notice 97-60 Exclusion For Employer-Provided Educational Assistance). Translation: put it in writing in your written work agreement. Non-discrimination tests apply. An employer may pay for any form of instruction or training that improves or develops an individual’s capabilities, whether or not job-related or part of a degree program under a qualified education assistance program without defeating the non-taxable status of the benefit supplied to the employee. MORE INFORMATION
Cell Phone: Employers may reimburse their nanny’s or caregiver’s business use of their cell phone. Your employe uses this phone to communicate with you during their shifts, take photos to share with you, and as a resource to research activities and schedules. It’s important to note that this reimbursement is strictly for business use – and rarely does the nanny or caregiver have 100% business use! Its up to you to determine the reimbursement that is reasonable.
» Internal Revenue Service Publication 15B: Employer’s Tax Guide to IRS Fringe Benefits
