Nanny cost beyond wage - taxes

[Anonymous]

I’m sure this question has been answered many times on this forum, but I can’t find any threads. I’m trying to do a cost comparison between nanny and au pair. I’m looking for a rough wage multiplier that would estimate all tax obligations well. We live in DC. Can anyone help? Like if we pay a nanny $20 an hour, 40 hours a week, 52 hours a day, what should I expect on top of that for tax payments?

Thanks.

[Anonymous]

Anonymous wrote:I’m sure this question has been answered many times on this forum, but I can’t find any threads. I’m trying to do a cost comparison between nanny and au pair. I’m looking for a rough wage multiplier that would estimate all tax obligations well. We live in DC. Can anyone help? Like if we pay a nanny $20 an hour, 40 hours a week, 52 hours a day, what should I expect on top of that for tax payments?

Thanks.

52 hrs a day, I would charge quadruple time! Which planet has a 52 hour day?

[Anonymous]

OP here, 52 weeks a year

[Anonymous]

You can use a nanny tax calculator like this one:

https://secure.gtm.com/Household/nanny-tax-calculator.aspx

[Anonymous]

Generally speaking, employers pay about 10% above the gross wages they pay the nanny to cover employer taxes. That 10% might also cover nanny tax services.

So if you’ll be paying a nanny around $42,000 gross a year, you need to add around $4,200 to cover your tax obligations.

Nannies are the highest cost childcare option.

[Anonymous]

OP, though you only asked about taxes, there are some other costs often associated with nannies as well: payroll service, workers comp (mandated in some locations but a good idea anywhere), and nanny year end bonus. Federal taxes will be a little north of 10% already so if you add in these other things you can expect about 15% on top of the weekly wages.

[Anonymous]

Anonymous wrote:OP, though you only asked about taxes, there are some other costs often associated with nannies as well: payroll service, workers comp (mandated in some locations but a good idea anywhere), and nanny year end bonus. Federal taxes will be a little north of 10% already so if you add in these other things you can expect about 15% on top of the weekly wages.

Yep, and DC residents also now have to pay additional taxes to cover DC's new paid leave law. We just paid our first quarter's taxes (it isn't huge, but it is yet another expense).

[Anonymous]

Anonymous wrote:You can use a nanny tax calculator like this one:

https://secure.gtm.com/Household/nanny-tax-calculator.aspx

Not OP but I'm interested in this thread. I just did the calculations assuming a net hourly rate of $21/hour and the site told me I'd end up paying about 35% more?? $49k/year vs $67k/year. That doesn't seem right... What am I missing?

[Anonymous]

Anonymous wrote: I just did the calculations assuming a net hourly rate of $21/hour and the site told me I'd end up paying about 35% more?? $49k/year vs $67k/year. That doesn't seem right... What am I missing?

You shouldn't really estimate based on net pay as you don't know your employee's personal income tax withholdings. Calculate on gross pay. That may be why your responsibility seems high