How to reimburse a nanny for gas and mileage
When you hire a nanny, there are lots of details to work out. For example, driving expenses.
Does your nanny drive your kids to school, playdates or activities? Does she run errands for you? If your nanny uses your car while she's caring for your kids, she should be compensated for any gas she buys or tolls she drives through. If she regularly uses her personal car to chauffeur your kids, she should be repaid for gas, tolls and any wear and tear on her car.
So how should you handle the reimbursement? If you live in California, Washington, D.C. or Massachusetts, the law requires you to reimburse your nanny for the miles they drive in their vehicle while they're on the clock at the IRS-mandated rate of 58 cents per mile. Commuting to and from your home does not count toward their mileage reimbursement.
If you don't live in one of those three states, here are four options for handling mileage reimbursement. Use the one that works best for your situation.
1. Use the IRS mileage rate
The IRS' standard mileage reimbursement rate is used to calculate the cost of gas, maintenance and depreciation of a car used for business purposes (like running errands for families or transporting kids).
Using this 2019 rate of 58 cents per mile is helpful because it covers all of the expenses that your nanny could incur from using their car.
But for this to work, your nanny needs to keep track of the miles they drive in order for you to use this rate. You can also have them create an online spreadsheet that you both access, using a program like Google Drive. Track the days your nanny works and the miles they drove each day. When pay day comes, it will be easy to figure out how much you owe them. This method will also help keep track of their hours in case you need to pay overtime.
Note: Gas and mileage is not considered taxable compensation, so neither you nor your nanny have to pay taxes on it. To find out more about nanny taxes, contact Care.com HomePay.
2. Flat rate compensation
If keeping track of all the miles driven is too much of a hassle, you could also include a flat rate line item for gas and mileage on your nanny’s pay stub. If your nanny drives a consistent number of miles to transport your children, this option makes things a little easier. But since you'll just be estimating what expenses your nanny will incur when using her car, be sure to communicate with them to confirm that you aren't underpaying them. Just keep in mind that this additional compensation will be subject to taxes.
3. Reimbursement per job
For part-time nannies, reimbursement per job can be more fitting. If your nanny periodically drives your kids or doesn't follow a set weekly schedule of covering the kids' transportation, it makes sense to compensate them each time they use their car. It's a perfect way to give your nanny their reimbursement in a timely manner so they’re immediately repaid for the transportation expenses. Make sure to use the 58 cents per mile IRS rate for reimbursement so you don’t have to worry about taxes.
4. Increased pay
Some families simply choose to give their nannies a raise to cover the extra driving expenses. It's an easy solution, but the problem with this method is that both you and your nanny then have to pay taxes on the extra wages. Do the math, but it may end up costing you more.
Discuss these options with your nanny and agree on a system that works for everyone. Make sure you include the details in your nanny contract. Don't have one yet? Use this Sample Nanny Contract to get you started.
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