Nanny Taxes in Illinois

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 Illinois.

Illinois Minimum Wage

Household employees must be paid at least the highest of the federal, state, or applicable local minimum wage rates. State, city, and county rates in Illinois are all higher than the federal minimum wage of $7.25/hour and will apply depending on the location of work.

In Chicago, the minimum wage is $15.80/hour. This is the rate that applies to domestic workers regardless of the number employed by a family.

In the rest of Cook County (outside of Chicago), the rate is $13.70/hour.

The rest of Illinois has a minimum wage rate of $14/hour. The rate will increase to $15/hour on January 1, 2025.

For the first 90 days with an employer, a worker can be paid up to 50 cents less per hour than the minimum wage.

Overtime

Household employees in Illinois are required to be paid at least time and a half for hours worked over 40 in a seven-day workweek. Live-in workers are not entitled to overtime pay.

Pay Period

Household employees must be paid at least twice per month. They should receive their pay no later than 13 days after the pay period ends.

Illinois State Unemployment Tax & Rate

In Illinois, the new employer SUI (state unemployment insurance) rate is 3.950 percent on the first $13,590 of wages for each employee. This includes a 0.55 percent fund-building surtax. Employers with previous employees may be subject to a different rate ranging from 0.850 to 8.650 percent. This is an employer-only tax.

Workers’ Compensation Insurance

Household employers in Illinois are required to have workers’ compensation coverage for any employee working at least 40 hours/week for 13 or more weeks. Get a quote on workers’ compensation insurance.

Live-in Employees

To be considered a live-in employee, a household worker in Illinois must live at the home (place of employment) for at least five days a week, sleeping on the premises for four consecutive nights.

Live-in employees are not entitled to overtime pay and don’t need to be paid for time spent sleeping, eating, or for personal entertainment if they are completely free from all duties. However, they must be paid for these time periods if they are interrupted to perform work.

Domestic Workers’ Bill of Rights

Household employees in Illinois who are regularly employed for at least eight hours a week receive added protections under the state’s Domestic Workers’ Bill of Rights. Live-in employees and workers employed by an agency are also included. Occasional babysitters are excluded.

Under the Illinois Domestic Workers’ Bill of Rights, household employees must receive:

• An hourly pay rate of at least minimum wage
• At least 24 hours of rest in each calendar week and a 20-minute meal break for every 7 1/2 hours worked. The employee’s day of rest should, whenever possible, coincide with their religion’s traditional day of worship.
• Protections against sexual harassment
• Safeguards from being paid “an oppressive and unreasonable wage”

If a household employee voluntarily agrees to work on their day of rest, they need to be compensated at an overtime rate for all hours worked that day.

Part-time employees – working 20 or fewer hours in a calendar week – are excluded from the day of rest requirement.

Starting January 1, 2023, the “One Day of Rest in Seven” requirement will change to 24 hours of rest in seven consecutive days from 24 hours in a calendar week. Also, if an employee works an additional 4.5 hours over 7.5 hours (or 12 hours total), they are entitled to a second 20-minute unpaid mail break.

Learn more about Illinois’ Domestic Workers’ Bill of Rights.

Illinois Paid Leave for All Workers Act

Effective January 1, 2024, workers can earn up to 40 hours of paid leave from work in a 12-month period. Workers can use paid leave for any reason and employers may not require workers to provide a basis for their time off request. Workers earn one hour of paid leave for every 40 hours they work.

Starting on March 31st, 2024, or 90 days following the commencement of employment, workers can begin using their earned time off for any reason.

Workers will need to be paid their full wages while on leave.

Learn more about Illinois Paid Leave for All Workers.

Chicago Domestic Worker Agreement

Household employers in Chicago must provide their workers with written contracts. The work agreement must include the employee’s wages and work schedule and must be provided in the worker’s preferred language. A household employee includes any person whose primary duties include housekeeping, nanny services, caregiving, personal care, or home health services. This rule took effect on January 1, 2022. For more information, visit Chicago Domestic Workers Contract Mandate.

Chicago Paid Sick Leave

Household employers in Chicago must provide paid sick leave to their employees if they work at least 80 hours within any 120-day period. Workers can accrue and use up to five paid sick days (or 40 hours) per year, earned at a minimum rate of one hour for every 40 hours worked. Accrual begins on the first day of employment. Up to 20 hours of unused sick time may roll over to the next year. However, employers can limit sick time usage to 40 hours per year. They can also restrict a new employee’s use of paid sick leave until they have completed six full months of continuous employment.

Employees can use paid sick leave if:

• they are ill or injured or for the purpose of receiving professional care, including preventive care, diagnosis, or treatment, for medical, mental, or behavioral issues, including substance use disorders.
• they are caring for a family member who is ill, injured, or ordered to quarantine, or caring for a family member receiving professional care, including preventive care, diagnosis, or treatment, for medical, mental, or behavioral issues, including substance use disorders.
• they (or a member of their family) are a domestic violence (as defined by the Illinois Domestic Violence Act) or sex offense victim (as defined by the Illinois Criminal Code)
• their child’s school/childcare facility is closed due to a public health emergency
• they need to obey a governmental order or are required by a treating healthcare provider to stay at home to minimize the transmission of a communicable disease; remain home while experiencing symptoms with a communicable disease; obey a quarantine order; or obey an isolation order.

If you already have a paid sick leave policy that meets or exceeds the required accrual rates, you do not need to create a new or separate plan to adhere to the city’s law.

Learn more about Chicago Paid Sick Leave.

Chicago Paid Leave and Paid Sick and Safe Leave Ordinance

On July 1, 2024, Chicago Paid Sick Leave will be replaced by a new Paid Leave and Paid Sick and Safe Leave Ordinance. Employees will be required to receive 10 days of paid leave, broken up into five sick days and five days of paid time off for any reason. Employees can use paid leave for any purpose and aren’t required to give a reason or submit documentation for using this leave. An employee can use paid sick leave for the same reasons under Chicago Paid Sick Leave.

Beginning January 1, 2024, or on a covered employee’s first day of employment, whichever is later, an employee must accrue one hour of paid sick leave and one hour of paid leave for every 35 hours worked, up to 40 hours of paid sick leave and 40 hours of paid leave per 12-month period. Leave must accrue in one-hour increments. Employers don’t need to pay an employee for any unused leave time that is not carried over at year-end.

Learn more about Chicago Paid Leave and Paid Sick and Safe Leave.

Cook County Paid Leave

Household employees who work at least 80 hours within any 120-day period for a family in Cook County are eligible for paid leave to be used for any reason. Cook County’s Paid Leave Ordinance replaces its Earned Sick Leave Ordinance.

Employers that are covered by Cook County Paid Leave are covered by this local law only and not the Illinois Paid Leave for All Workers Act.

Paid leave starts to accrue on the first day after an employee starts work. For every 40 hours worked, a worker accrues one hour of paid leave. An employee can only accrue up to 40 hours of paid sick leave in a 12-month period. An employee can also carry over their unused paid sick leave into the next 12-month period.

Employers may frontload 40 hours of paid leave on the first day of the benefit year instead of having employees accrue time as work is performed. If an employer frontloads at least 40 hours of paid leave, they are not obligated to allow a carryover of unused time from one year to the next.

The 12-month period is calculated from the date they began to accrue paid leave.

A household employer doesn’t need to provide additional paid leave if their paid-time-off policy provides employees with at least 40 hours of paid leave per year, which can be used for any reason.

They must be compensated at the same pay rate they regularly earn.

Household employers also do not need to pay for unused paid leave upon an employee’s termination unless they have agreed to do so in their work agreement. However, employers may have obligations to pay unused, earned paid time off under the Illinois Wage Payment and Collection Act.

Chicago’s Human Rights Ordinance

All Chicago employers – including families with household help – must display a poster advising employees of the prohibition against sexual harassment and have a written sexual harassment policy that includes:

• A statement that sexual harassment is illegal in Chicago;
• The definition of sexual harassment as defined by the Ordinance;
• Anti-sexual harassment training requirements;
• Examples of prohibited conduct that constitutes sexual harassment;
• Direction as to how to report sexual harassment;
• Legal services available to victims of sexual harassment; and
• A statement that retaliation for reporting sexual harassment is prohibited.

Household employers must provide one hour of anti-sexual harassment training and one hour of bystander training to all employees on an annual basis.

Household employers who fail to comply with the ordinance could face fines of up to $10,000 per day.

Victims’ Economic Security and Safety Act (VESSA)

All Illinois employers are required to provide leave to their employees who are survivors of domestic or gender violence, sexual assault, or “any other crime of violence.” Workers can take up to four weeks of unpaid leave per any 12-month period to seek medical help, legal assistance, counseling, safety planning, and other assistance. Leave can be taken intermittently or on a reduced work schedule. Employers are prohibited from discriminating against employees who are victims of domestic or sexual violence.

Employees may also take leave if they have family or household members who are survivors. Family and household members include spouses; parties to a civil union; parents; grandparents; children; grandchildren; siblings; any other person related by blood, marriage, or civil union; and “any other individual whose close association with the employee is the equivalent of a family relationship as determined by the employee.”

Learn more about VESSA.

Pregnancy Fairness Law

Household employers need to provide accommodations for pregnant employees and new mothers. The pregnancy accommodation law, also known as the Illinois Pregnancy Fairness Law, requires an employer to provide reasonable accommodations for an employee with conditions related to pregnancy, childbirth, or related medical conditions, if she so requests, with the advice of her health care provider. Learn more about what reasonable accommodations may include.

Final Pay

When an employee quits or is involuntarily terminated, their final paycheck is due at the time of separation or no later than the next regularly scheduled payday. An employee can request to have their final compensation paid by check and mailed.

Helpful Links for Nanny Taxes in Illinois

Illinois Department of Labor

Illinois Department of Revenue

City of Chicago: Your Home is Someone’s Workplace

Household Employer Responsibilities

My Rights as a Domestic Worker

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 $2,700 or more to any household employee in 2024 (or paid a domestic worker $2,600 or more in 2023), then you need to 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 it 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 the age of 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 2024, the IRS has set the optional standard mileage rate at 67 cents per mile driven. Paying mileage is not mandatory or 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 Illinois

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.