Nanny Taxes in Arizona
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 Arizona.
Arizona Minimum Wage
Household employees must be paid at least the highest federal, state, or applicable local minimum wage rates. Arizona’s minimum wage rate is adjusted annually to reflect changes in the cost of living. The state’s 2023 minimum wage is $13.85/hour. Arizona does not allow employers to pay subminimum wages to young workers or students.
Household employers in Arizona must display a minimum wage poster to notify their employees of their rights under state law. The Industrial Commission of Arizona has published an updated minimum wage model poster (PDF) employers can use to satisfy the poster requirement for 2022.
In Flagstaff, the 2023 minimum wage rate is $16.80/hour.
In Tucson, the minimum wage is $13.85/hour. The Tucson Minimum Wage Act will increase the city’s minimum wage to $15/hour by 2025. The rate will be $14.25/hour in 2024. After 2025, the minimum wage may increase each January depending on the inflation rate.
Household employees in Arizona are required to be paid at least time and a half for hours worked over 40 in a seven-day workweek. Overtime compensation is not required for live-in employees.
Paid Sick Leave Law
Arizona’s paid sick leave law covers small employers including families with household help. Small employers (less than 15 employees) are required to provide up to 24 hours of sick leave a year. Employees earn sick leave at the rate of one hour for every 30 hours worked. Full-time, part-time, and temporary employees are all covered under the law and will earn sick leave based on hours worked. Employers can require newly-hired workers to wait 90 days until they ask for paid sick time. Employees can take sick time for themselves and for a family member who has an allowable reason for sick leave. Paid sick leave can be used for:
- Physical or mental illness, injury, or health condition
- Getting a diagnosis, preventative care, or treatment
- A child’s school or place of care has been closed due to a public health emergency
- Employee or family member’s “presence in the community may jeopardize the health of others” due to a suspected or exposure to a communicable disease
The law also contains a safety clause for victims of domestic violence, sexual assault, or stalking. Employees can use leave to address psychological, physical, or legal reasons.
Arizona State Unemployment Tax & Rate
In Arizona, the new employer SUI (state unemployment insurance) rate is 2.0 percent on the first $8,000 of wages for each employee. Employers with previous employees may be subject to a different rate. This is an employer-only tax.
Workers’ Compensation Insurance
Household employers in Arizona are not required to have workers’ compensation coverage for any full- or part-time employees. However, you can choose a voluntary policy to protect both you and your employee. Get a quote on workers’ compensation insurance.
Helpful Links for Nanny Taxes in Arizona
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.
Social Security and Medicare taxes are commonly referred to as FICA taxes. If you pay cash wages of $2,600 or more to any household employee in 2023 (or paid $2,400 in 2022), 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.
If your employee uses their own car in the course of their work, you can reimburse them for mileage. For 2023, the IRS has set the optional standard mileage rate at 65.5 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 Arizona
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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