Nanny Taxes in Vermont

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 Vermont.

Vermont Minimum Wage

Household employees must be paid at least the highest of the federal, state, or applicable local minimum wage rates. Vermont’s state minimum wage of $13.67/hour applies. The state minimum wage rate is reviewed annually and will increase by either five percent or by the percentage increase of the Consumer Price Index.

Overtime

Household employees in Vermont 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 and or when work is performed on a holiday.

Vermont State Unemployment Tax & Rate

In Vermont, the new employer SUI (state unemployment insurance) for most employers is 1.00 percent on the first $14,300 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 Vermont 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.

Voluntary Paid Family and Medical Leave Program

The Vermont Family and Medical Leave Insurance Plan, a voluntary paid family and medical leave program, will give workers access to paid family and medical leave insurance by 2025.

On July 1, 2024, household employers with two or more employees will be able to select from several plan design options that allow them to support the needs of their employees.

Beginning July 1, 2025, household employees who work for Vermont families that do not offer VT-FMLI and household employers with one employee can purchase coverage through the VT-FMLI individual purchasing pool.

Under VT-FMLI, Vermont employees can receive 60 percent wage replacement for six weeks for qualifying events. Qualified events include:

• The birth of a child and care for the newborn child within one year of birth;
• An employee’s adoption of a child or foster care placement, and to care for the newly placed child within one year of placement;
• Caring for the employee’s spouse, child, stepchild, foster child, ward who lives with the employee, parent or parent of the employee’s spouse who has a serious health condition;
• A serious health condition that makes the employee unable to perform the essential functions of their job; or
• Any qualifying exigency arising out of the fact that the employee’s spouse, child, or parent is a covered military member on “covered active duty,” or to care for a covered service member with a serious injury or illness if the eligible employee is the service member’s spouse, son, daughter, parent, or next of kin (i.e. “military caregiver leave”).

Learn more about Vermont’s Voluntary Family and Medical Leave Insurance.

Helpful Links for Nanny Taxes in Vermont

Vermont Department of Labor

Vermont Department of Taxes

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 Vermont

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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