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> She made about $50k, but I had to pay her with after-tax income so the actual cost of the nanny was closer to $70k of my pretax income. This is the precise do
by klipt 6y ago
> She made about $50k, but I had to pay her with after-tax income so the actual cost of the nanny was closer to $70k of my pretax income. This is the precise double taxation you’re talking about.
That's just payroll taxes, which fund things like your nanny's social security and Medicare, and corporations have to pay them too.
If the nanny was on a corporation's payroll it would cost them 70k too, so if you paid the corporation for her services, you'd still have to pay more than 70k for that corporation to make a profit.
- bradleyjg 6y agoNo, payroll tax is a separate issue. What the grandparent post is talking about is that a company can deduct its expenses and only pay tax on net income but a family can’t. I’m not sure there’s a way to fix that—the concept of profit doesn’t really apply to a family—but it isn’t a reasonable thing to point out.
- encoderer 6y agoYes exactly. Thank you. Generally people should just assume that others with lived experience are not total idiots about it. One way to fix it is simply to let families use their SSN as the EIN for the employee, and remove that from your adjusted gross income.
- klipt 6y agoSo you think hiring a nanny should have special tax benefits vs e.g. paying a daycare? You realize daycares also pay the same payroll tax, should daycare patrons be able to deduct the daycare's taxes too?
- klipt 6y agoIf you only tax money people don't spend, i.e. only tax savings, then you discourage saving. Taxes aren't just about fairness, they're about setting the right incentives. Do you think discouraging saving is a good incentive?
- bradleyjg 6y agoI agree it would be problematic to tax savings. However, if you have a two earner household a nanny is arguably a cost of revenue. I could imagine a system that allowed cost of revenue expenses to be deducted but not, say, a trip to bora bora.
- deleted 6y ago[deleted]
- klipt 6y agoOkay, but saying there should be more tax incentives for childcare is different to saying you should be able to deduct all your workers' payroll taxes (which could equally apply to someone in a mansion whose staff includes a cook, a butler, and a pilot who flies them to Bora Bora every year). You actually can deduct some childcare costs with a Dependent Care Flexible Savings Account. It's only up to 5k a year though which is lower than the cost of even the cheapest daycares in many areas.
- LorenPechtel 6y agoHow about domestic help/childcare/dogwalking etc is deductible up to 50% or perhaps 33% of what you would reasonably would make in the time it would take you to provide whatever service they are providing. (Divide your employment income by the hours you typically spend in a year doing that job to get an hourly rate. You can't deduct such expenses on days you aren't working except if the nature of their pay means it continues anyway. Your taking a day off work doesn't mean you get to not pay your nanny, thus that expense remains deductible.)
- deleted 6y ago[deleted]