Nanny Taxes in Puerto Rico

Household employers need to comply with tax, wage, and labor laws that affect nannies, in-home senior caregivers, and other household employees. While federal laws cover employers in all states, there are also state- and city-specific regulations that employers must follow. Here’s what you need to know about nanny taxes in Puerto Rico.

Puerto Rico Minimum Wage

Household employees must be paid at least the highest of the federal, state, or applicable local minimum wage rates. Puerto Rico’s state minimum wage rate of $10.50/hour applies.

Overtime

Household employees in Puerto Rico are required to be paid at least time and a half for hours worked over 8 in a day and 40 in a week. 

Workers’ Compensation Insurance

Household employers in Puerto Rico are required to have a workers’ compensation policy for any household employee. There is an exclusive state fund, and employers may not insure through private carriers, self-insurance, or through groups of employers. There is no exemption for employers with small numbers of employees.

Disability Insurance

Short term disability coverage must be provided for all employees. The policy must include AD&D coverage (accidental death and dismemberment).

Vacation and Sick Leave

Employees hired in Puerto Rico prior to January 26, 2017 will accrue sick leave at 1 sick day per month and vacation time at 1.25 days per month. For employees hired after January 26, 2017, sick leave accrues at 1 day per month and .5 vacation days a month during the first year of service. After the first year of service and up to the fifth year of service, the accrual rate will be .75 vacation days a month. After the fifth year worked and up to the fifteenth year, the rate will be 1 vacation day per month. After the fifteenth year of service has been complete, the accrual rate is 1.25 vacation days per month.

Employees must work at least 130 hours per month for sick leave and vacation time to accrue.

Severance Pay

Employees hired prior to January 26, 2017 that are terminated without cause are entitled to 2 months of severance if they are terminated within the first 5 years of service; 3 months of severance if terminated after the fifth and up to the fifteenth year of service; and 6 months of severance if terminated after 15 years of service.  This also includes an additional indemnification equal to 1 week for each year of services within the first 5 years of service; 2 weeks for each year of service if termination occurs from the fifth up to the fifteenth year of service, and 3 weeks for each year of service after completing 15 years of service.

For employees hired after January 26, 2017 and terminated without cause, they are entitled to 3 months of severance and an additional 2 weeks of wages for each year of service completed.

Helpful Links for Nanny Taxes in Puerto Rico

Department of Labor & Human Resources of Puerto Rico

Financial Oversight and Management Board for Puerto Rico

Federal Regulations

All household employers need to follow certain federal regulations including:

Fair Labor Standards Act (FLSA) Classification Guidelines

• Household workers are considered employees and not independent contractors. Learn more about misclassifying employees as independent contractors.
• Household workers are also non-exempt employees, which means they receive overtime pay of at least time-and-a-half for hours worked over 40 per workweek. Learn more about overtime pay.

FICA Taxes

Social Security and Medicare taxes are commonly referred to as FICA taxes. If you pay cash wages of $2,800 or more to any household employee in 2025 (or paid a domestic worker $2,700 or more in 2024), you must withhold and pay FICA taxes. FICA taxes are 15.3 percent of cash wages. As an employer, you pay 7.65 percent (6.2 percent for Social Security and 1.45 percent for Medicare). Your employee's share is also 7.65 percent, which you can withhold from their wages or choose to pay yourself. You don't withhold or owe FICA taxes on wages you pay to your spouse, child under the age of 21, parent, or any employee under 18 at any time during the calendar year.

Federal Unemployment Tax (FUTA)

If you pay a household employee total cash wages of $1,000 or more in any calendar quarter, you'll owe federal unemployment tax. This is an employer-only tax. FUTA is six percent of cash wages on the first $7,000 you pay an employee.

Mileage Reimbursement

If your employee uses their own car in the course of their work, you can reimburse them for mileage. For 2025, the IRS has set the optional standard mileage rate at 70 cents per mile driven. Paying mileage is not mandatory in most states, and you can reimburse your employee at a different rate. However, if the cost of mileage causes your employee to fall below minimum wage, then you need to reimburse them for mileage.

GTM Can Help with Nanny Taxes in Puerto Rico

Call (800) 929-9213 for a free, no-obligation consultation with a household employment expert. We’ll answer all your questions and show you how to comply with wage, tax, and labor laws as a household employer. Or, if you’re ready to have GTM Payroll Services handle it all for you, get started with our nanny payroll and tax service.

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