When hiring a housekeeper, there are several tax issues to consider. This includes whether or not the housekeeper’s salary is tax deductible, and the rules surrounding withholding taxes. In most cases, you cannot deduct the cost of hiring a housekeeper. However, there are exceptions to this rule, if you own a home-based business.
Tax Issues – Housekeepers
The IRS requires you to withhold Social Security and Medicare taxes from your housekeeper and pay your share if they deem you to be a household employer. The IRS does not consider how many hours per week the housekeeper works. Neither do they mind whether or not you hired her from an agency. They consider you to be a household employer if you provide all of the tools for the work and control how it is completed. If your housekeeper provides all of her own cleaning supplies and has a measure of control over how to do the housework, she is not your employee and you do not have to withhold or pay taxes.
If you do not own a home-based business, you cannot claim the cost of a housekeeper on your tax return. Housekeeping expenses are considered personal in nature and are not deductible. This is true even if you must have a housekeeper due to an injury or medical condition. Housekeeping costs are specifically disallowed by the IRS as an eligible medical expense. A portion of the housekeeper’s salary may be tax deductible if the housekeeper also provides personal care services.
Home Office Expenses
If you qualify to claim home office expenses, you may be able to deduct a portion of the costs of a housekeeper as a business expense. To be eligible to claim home office expenses, your home office must be your main place of work. Also, the business portion of your household expenses is calculated either by the number of rooms in the house or by the square footage used for business divided by the total square footage of the house. Eligible household expenses include mortgage interest, property taxes, utilities and repairs and maintenance. Housekeeping expenses would fall under the latter category.
If you hire a live-in housekeeper, the IRS generally considers this to be a benefit to you and not the housekeeper. Therefore, it not taxable to the employee. Likewise, you must provide meals for the housekeeper, and lodging must also be part of the contract.