Nanny Tax

  

Categories: Tax

Nothing says “financial comfort” quite like having a household staff. And lucky us, thanks to a recent financial windfall of epic proportions, we’ve been able to go out and hire a full-time maid, butler, nanny, groundskeeper, and an award-winning chef who specializes in making dishes out of our all-time favorite food: bacon. Life is good.

But one thing that we should keep in mind is that, now that we have this household staff in our employ, we need to start paying a little something called a “nanny tax.” The nanny tax is a federal tax that folks like us get to pay because the IRS considers our staff employees, and considers us employers. Therefore, if we’re paying our people more than a certain specified amount (in 2018 it was $2,100 annually), we’ll need to get ourselves an employer identification number and pay taxes like other employers do. Depending on which state we live in, we might have to pay a state-level nanny tax as well.

But whatever. It’ll all be worth it when we’re chillin’ in our pristine backyard munching on a platter-full of delicious, bacon-themed culinary delights.

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Finance: What is Gift tax?0 Views

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Finance Allah Shmoop What is gift tax Of those I

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Rs people They ruin everyone's fun You can't even give

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away things anymore without it being taxed Even have some

00:15

t Khun spill into a harbor Boston gift tax party

00:18

Anyone know well so overly Simply as of two thousand

00:21

nineteen you're allowed to give about fifteen grand a year

00:23

with the expectation that this number will rise a bit

00:26

with inflation year after year And on that fifteen grand

00:29

or less there is no tax owed You have to

00:32

declare to the IRS people that you gifted but you

00:35

don't have to write them An incremental check and all

00:37

kinds of little tweaks to the definitions of givers and

00:40

receivers have made the state transfer easier in this country

00:43

For example of Family Khun Gift in multiple directions from

00:46

multiple sources like each year Mama Bear Khun Gift fifteen

00:49

grand to baby bear than fifteen grand too sulky teenager

00:53

texting bear then another fifteen grand Teo the Elder Bear

00:57

for a total of forty five grand gifted from Mama

00:59

Bear tax free Then Daddy Bear can do the same

01:03

for each kid and the elder such that they can

01:06

gift in one year ninety thousand dollars total in gifts

01:10

with no tax And there are other twists They aren't

01:13

limited to gifting Fax like they Khun gift art and

01:16

jewelry and mountain vats of honey or porridge or privately

01:20

appreciated stock like stock they bought for a dollar is

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now trading at fifty and they can give fifteen grand

01:26

worth of that stock So Hugh may reasonably wonder how

01:29

they would determine the value of private stock if it's

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not public or really any of the above None actively

01:35

traded and valued things like jewelry and stuff like that

01:38

Well there isn't a daily market for shares in private

01:40

companies or artwork or jewelry Usually So how do you

01:43

assess the value Well usually value is taken it whatever

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the last round was invested at by professional investors of

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its private stock even if it was five years ago

01:52

and the company has gone up a ton in value

01:54

But if it has well it's likely the company will

01:57

have been required to get a new four o nine

01:59

a valuation which is basically just a few high priced

02:02

lawyers assessing professionally what the company is worth based on

02:05

other similar companies that were sold or funded recently It's

02:09

the best guess of lawyers and accountants and the same

02:11

applies to appraisals of jewelry and art And like if

02:14

your parents are giving that stuff away to you too

02:17

willing to keep it under fifteen grand the arrest I

02:19

won't bug you So you can imagine that a family

02:21

wanted to transfer as much as they possibly could to

02:24

their kids Will The impetus could involve a whole lot

02:26

of downward pressure on valuations such that the fifteen grand

02:30

that was tax free gift herbal might really be worth

02:33

now something more like twenty grand or thirty grand or

02:36

maybe even fifty grand were it to sell that day

02:38

That is private valuations carry all kinds of risks The

02:41

gift ease as well Like if they want to sell

02:44

them like Mama thinks that jewelry a piece that was

02:48

made for her is really worth thirty four thousand dollars

02:50

And he's getting away with something stating It's only worth

02:53

fifteen But then baby there goes to try to sell

02:55

it on eBay and gets like three grand for it

02:57

Well may be discounting private things make sense The key

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notion here is that fifteen grand of value can be

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transferred tax free legally Happily the IRS has no tax

03:07

on that But above there there's all kinds of gift

03:09

tax right So what happens if Mama Bear gives baby

03:12

bear twenty thousand dollars in cash one year You know

03:15

Tio enable the baby or to buy a top of

03:17

the line Dr Braun's porridge warmer Well either Baby bear

03:20

can just pay income tax on the five thousand dollars

03:23

difference like fifteen grand was tax free and then five

03:26

thousand above that that five thousand above it is taxable

03:29

as a gift tax And in fact it's Mama Bear

03:32

who would technically be legally responsible for paying that tax

03:36

on the five grand But baby Bear can do it

03:38

if well you know if she wants or she can

03:40

write Mama bear a check for five grand back and

03:43

it's the net number that the IRS cares about There's

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all kinds of other gift taxes the president's change them

03:50

limits and maximums all the time Currently a family Khun

03:53

Gift in about eleven million dollars in change with essentially

03:56

no estate tax when they died That protects the farms

03:59

in the Midwest from having to be sold When you

04:02

know great Grandpa Joe dies and he on the farm

04:05

for one hundred years That's how gift taxes air set

04:08

up And well if someone gives you a horse isn't

04:11

there a phrase about looking a gift horse in the

04:13

mouth You know be careful with those things by

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Finance: What is a Consumption Tax?
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