Household Employee Insurance
Household Employee Insurance
Frequently Asked Questions
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Is health insurance I provide for my household employee taxable?
Often families find that the best qualified household employees are requesting some nominal employment benefits. Contributing to or providing a healh insurance policy for the employee is often a tremendous recruitment and retention incentive. Health insurance premiums paid by the employer are not treated as income to the employee. Therefore, the employer does not pay the approximate 10% employment tax on the benefit, and the nanny does not pay Social Security, Medicare or Income Taxes on the premium (easily 20% or more of the premium). Caveat: The employer must offer the same health benefit to all employees - easy if the housekeeper is the only employee, perhaps problematic if there are multiple home health aides also employed by the family.
Families are advised to either pay the health insurance premium directly to the insurer or to pay the employer contribution to employee insurance to the employee in a check separate from their payroll and clearly memoed as Insurance Premium with policy identification information. It is recommended further that the family keep a copy of the employee's current insurance card on file as proof of coverage. This documentation would be important should the family be audited.
Many families initially offer a 50% health insurance benefit up to a certain cap per month ($150 - 200 is common) to the household employee. They often allow the employee to self-select his/her policy, assisting him/her if requested. When it is time for an annual pay review, often times the employee and family will agree to have the family pick up the entire insurance payment in lieu of a raise or in conjunction with a reduced raise. The tax benefits they both enjoy make this a very practical solution.
More Information
For More Information contact HomeWork Solutions, Inc.
at 1-800-NaniTax or e-mail and submit a question.
