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We are hiring a live-in nanny. How do you figure her room and board for tax purposes?
In general, the Internal Revenue Service (see §119(a)) allows you to exclude from income the value of meals and lodging furnished by the employer when hiring a live-in nanny or household worker (nanny room and board), provided the following conditions are met:
- Meals and lodging (room and board) must be furnished on the business premises (the family’s home),
- Must be furnished for the employer’s convenience (eg. she cannot leave the home for lunch when on duty), and
- For lodging only, employees must be required to accept the lodging as a condition of employment.
As a practical matter, if you advertise for a live in nanny, and provide her a room, suite, or apartment on your premise, the economic value of this lodging is deemed provided for your convenience and exempted from taxation. This benefits both employer and employee, as both parties have a lower basis for taxes. Many families need a live-in nanny because of the nature of the family’s employment – doctors on call, single parents with out-of-town business travel, and occupations with rotating schedules are just a few such examples.
Meals provided to a live-in nanny, or a live out nanny for that matter, are similarly exempted from income by the Internal Revenue Code for live-in nanny room and board taxes. A nanny is generally not free to leave the premises to obtain her own food (who would watch the children?) so the meals are being provided in your home for your convenience.
A word of caution: This treatment for meals and lodging (also referred to as room and board) is not followed 100% by all states. You are advised to check with your state to learn if they have any exceptions to regulations for live-in nanny room and board taxes.