Nanny Taxes in Michigan

Household employers must comply with tax, wage, and labor laws affecting 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 Michigan.

Michigan Minimum Wage

Household employees must be paid at least the highest of the federal, state, or applicable local minimum wage rates. Michigan’s state minimum wage of $10.33/hour applies. This rate will increase to $10.56/hour on January 1, 2025 and then to $12.46/hour on February 21, 2025.

Overtime

Household employees in Michigan are required to be paid at least time and a half for hours worked over 40 in a seven-day workweek. Overtime pay is not required for live-in employees.

Michigan State Unemployment Tax & Rate

In Michigan, the new employer SUI (state unemployment insurance) rate is 2.70 percent on each employee’s first $9,500 of wages. Employers with previous employees may be subject to a different rate. This is an employer-only tax.

Workers’ Compensation Insurance

Household employers in Michigan must have a workers’ compensation policy for any employee except those employed for less than 35 hours per week for 13 weeks or longer during the preceding 52 weeks. Get a quote on workers’ compensation insurance.

Earned Sick Time Act

Michigan’s Earned Sick Time Act (ESTA) will require employers with one to nine employees to allow their workers to take up to 40 hours of accrued paid sick time per year and up to an additional 32 hours of unpaid sick time per year. Employees will accrue earned sick time at a rate of not less than one hour for every 30 hours worked. All accrued earned sick time can carry over from year to year. Employers are not required to pay employees for unused accrued sick time.

Accrual begins on February 21, 2025, or upon commencement of the employee’s employment, whichever is later. An employer may require a new worker to wait until the 90th calendar day after commencing employment before using accrued earned sick time.

Paid sick time can be used for:

• The employee’s or the employee’s family member’s mental or physical illness, injury, or health condition; medical diagnosis, care, or treatment of the employee’s or the employee’s family member’s mental or physical illness, injury, or health condition; or preventative medical care for the employee or the employee’s family member
• If the employee or the employee’s family member is a victim of domestic violence or sexual assault, for medical care or psychological or other counseling for physical or psychological injury or disability; to obtain services from a victim services organization; to relocate due to domestic violence or sexual assault; to obtain legal services; or to participate in any civil or criminal proceedings related to or resulting from the domestic violence or sexual assault
• For meetings at a child’s school or place of care related to the child’s health or disability or the effects of domestic violence or sexual assault on the child
• For closure of the employee’s place of business by order of a public official due to a public health emergency; for an employee’s need to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency; or when it has been determined by the health authorities having jurisdiction or by a health care provider that the employee’s or employee’s family member’s presence in the community would jeopardize the health of others because of the employee’s or family member’s exposure to a communicable disease, regardless of whether the employee or family member has contracted the communicable disease

Family members include:

• Biological, adopted or foster child, stepchild or legal ward, a child of a domestic partner, or a child to whom the employee stands in loco parentis.
• Biological parent, foster parent, stepparent, or adoptive parent or a legal guardian of an employee or an employee’s spouse or domestic partner or a person who stood in loco parentis when the employee was a minor child.
• Grandparent
• Grandchild
• Biological, foster, or adopted sibling
• Any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship

Employers must provide written notice of an employee’s rights under the ESTA at the time of hiring or on February 21, 2025, whichever is later. Download the required notice.

Employers must also display a poster in the workplace containing specific rights listed in the ESTA. Download the poster.

Learn more about Michigan’s Earned Sick Time Act.

Final Pay

When a family terminates an employee, or the worker voluntarily resigns, they must pay the worker all wages due by the regularly scheduled payday for the period in which the termination or resignation occurs.

Helpful Links for Nanny Taxes in Michigan

Michigan Wage & Hour Division

Michigan Department of Insurance and Financial Services

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 will pay a domestic worker $2,800 or more in 2025), 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 2024, the IRS has set the optional standard mileage rate at 67 cents per mile driven. This rate increases to 70 cents per mile on January 1, 2025. 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 Michigan

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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