February 8, 2012
We get a lot of questions about health insurance. As a household employer, do I have to cover health insurance for my nanny? If I do provide it, are there any tax breaks to help offset the costs?
The answer to the first question is "No" -- health insurance is an optional benefit for families with a domestic employee(s).
On the second question, the answer is "Yes" -- household employers who decide to contribute to their employee's health insurance realize two tax advantages:
NON-TAXABLE COMPENSATION. The employer's health insurance contribution is considered "non-taxable compensation," which means that neither the employer nor the employee have to pay any taxes on that portion of the compensation.
THE HEALTH INSURANCE TAX CREDIT FOR SMALL EMPLOYERS. This recent legislation provides families with a tax credit of up to 35% of the health insurance contribution. To qualify, employers must a) contribute at least 50% of the health insurance premium, b) have less than 25 employees, and c) pay their employees -- on average -- less than $50,000 per year.
Together, these two tax incentives can make health insurance a smart part of the compensation package for many families. For an estimate of your savings, feel free to call us at 888-273-3356.