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On March 11, 2021, President Biden signed the American Rescue Plan (ARP) into law. Among many provisions related to COVID-19, the bill includes several items that impact most families and caregivers. Here are the top five:
1. Doubling the expenses families can put toward a Dependent Care Account (FSA)
This is usually the biggest care-related tax break you can take advantage of because the amount of income that you allocate toward your Dependent Care Account becomes tax-free. So, it acts like a tax deduction. The ARP increases the cap on the amount you can allocate toward a Dependent Care Account from $5,000 to $10,500 for the 2021 tax year – more than doubling the savings from an average of $2,000 to around $4,000. As a bonus, the ARP allows you to roll over unused money in your Dependent Care Account into 2022.
2. Increase in savings from the Child and Dependent Care Tax Credit
The amount of childcare expenses families can receive a tax credit on increases to $8,000 per dependent (max of $16,000 per household). Previously the cap was $3,000 per dependent (max of $6,000 per household). This tax break will now phase out for families with AGI over $440,000.
3. Extension of paid sick leave and paid family leave credits
The Families First Act (FFCRA) provided subsidized paid sick leave or paid family leave for several reasons related to COVID-19. The American Rescue Plan Act extends the FFCRA tax credits, providing an additional 10 days of subsidized COVID-related paid leave (up to $12,000 total) per employee, extending the time period for using subsidized paid leave through the end of September 2021, and expanding the COVID-related reasons that qualify for the tax subsidy. While providing this paid leave is now optional, access to a dollar-for-dollar reimbursement makes it much easier for families to provide the leave if the need arises.
4. Larger Child Tax Credit
The child tax credit increases from $2,000 for eligible children (up to age 16) in 2020 to $3,600 for each child up to age 5 and $3,000 for those age 6 to 17. The full increase is available for households with adjusted gross income (AGI) of $150,000 or less for joint filers ($75,000 for individual filers). The regular credit of $2,000 per child is still available for families with AGI of up to $400,000 for joint filers ($200,000 for individual filers).
5. A third stimulus payment
The American Rescue Plan provides a direct payment of $1,400 for those with annual adjusted gross income (AGI) of $75,000 or less ($150,000 for couples), gradually decreasing the payment amount for those that earn between $75,000 and $80,000 ($150,000-$160,000 for couples). Additionally, families that qualify can receive $1,400 for every child or other dependent they have. The stimulus checks are cut based upon income reported on the taxpayer’s 2019 tax return (or 2020 return if it has already been filed). The IRS provides an online tool for taxpayers to check the status of their stimulus check and access answers to FAQs.
While all five of these items do not apply to all families, the vast majority qualify for at least one. We encourage you to contact our partners at HomePay for a complimentary budgeting assessment.
Most people assume that paying their caregiver “on the books” will significantly increase their cost of care. Good news: they’re wrong! The truth is, for most employers, dependent care tax breaks offset most – if not all – of the employer payroll taxes. And the American Rescue Plan Act has greatly expanded those tax breaks. A typical family will see their savings from tax breaks at least double and some will see their savings even triple!
For most families, the tax savings will cover all the employer-related costs (including taxes, insurance, and payroll service) and some of the nanny’s wages. That’s right, most employers come out ahead by paying their household employees legally!
The 2021 Childcare Tax Breaks are Better Than Ever
If you employ someone in your home whose services are at least partly for the well-being and protection of a child (under age 13), and your household meets the work-related test — which means the care is needed because both parents work, are looking for work or are full-time students – the expenses qualify for one or both of the following tax breaks:
- Dependent Care Account. Also called a “Flexible Spending Account” (FSA), this tax break allows you to pay for childcare expenses using pre-tax dollars. The limit for 2021 is $10,500 per family per year. Depending on your marginal tax rate, utilizing your FSA can put as much as $4,800 per year in your pocket. While the rules are set by the IRS, families access this tax break through a participating employer. For enrollment details, check with your HR or Accounting Department.
- Child or Dependent Care Tax Credit (CDCTC). Families can receive a tax credit on care-related expenses through their federal income tax return using IRS Form 2441. The expense limit is $8,000 for one dependent or $16,000 for 2 or more dependents. Your credit percentage will depend on your Adjusted Gross Income (AGI), but most will get a credit between 20% and 50%, which will yield an annual savings between $1,600 and $4,000 for families with one child and between $3,200 and $8,000 for families with 2 or more children. Note: This break phases out for AGI >$440,000.
Maximizing Your Tax Breaks
Eligible expenses include the employee’s wages, employer taxes on those wages and any fees paid to a staffing agency. If your household AGI (adjusted gross income) is less than $125,000, the CDCTC will result in the most savings. If your AGI exceeds $125,000, you’ll likely get the most savings through an FSA.
SPECIAL SAVINGS NOTE: If you have access to an FSA, more than one dependent, and AGI between $125,000 – $440,000, you can maximize your savings by using both tax breaks. You’ll utilize your FSA for the full $10,500 and save up to $4,800 per year. If your dependent care expenses are greater than your FSA contribution, you will have “excess expenses” of up to $5,500 ($16,000 – $10,500 = $5,500). The excess expenses can be applied to the Tax Credit on Form 2441, which will save you an additional $1,100-$2,750 per year.
Thank you to our friends at HomePay for providing all of this great information. For an estimate of your tax costs and tax breaks, visit our website.
We are excited to announce that according to the Los Angeles County Health Department private domestic staff workers, such as nannies (who work more than 20 hours per week) are now eligible for the COVID-19 vaccine! You must bring the following documentation to prove that you are eligible: a photo ID (this does not have to be government-issued), proof that you live or work in Los Angeles and proof that you work in the childcare sector. Please be sure to fill out an attestation form to bring with you to your appointment. You can check with your local pharmacies, doctor’s office, and many other health organizations that are offering appointments for the COVID-19 vaccine. We hope these updates bring families and nannies a sense of comfort and happiness!
*Please note that Educated Nannies is an equal opportunity employer. We do not require nannies to be vaccinated as an agency. However, every family will decide what is the best choice for their household. We honor and respect everyone’s personal choices.
It is that time of year again where most of us are usually preparing to leave on a fun, family vacation while schools are on spring break. Some of us have been forced to cancel our previously scheduled itineraries due to the pandemic and stay at home orders in place. There plenty of safe and creative ways even during a pandemic we can spend our time such as road trips, spa nights and many more! Consider these five alterative ideas for spring break staycations that can keep your family safely entertained!
Take A Road Trip
Do you miss travelling and sight-seeing? While leisure air travel is not recommended, road trips are a great way have alternative fun and get the whole family out of the house. There are many roadside attractions with little to no contact involved for a photo op. You can also enjoy the scenery such as scenic coastlines, mountains or desert landscapes. Make sure to turn up the music and put the windows down!
Have A Spa Night
Stay out of the crowds with a staycation structured relaxing spa night at home! Each member of the family can enjoy their own bit of pampering and self-care. You can create stations for nails, skin care and hair services. Easily pick up or order online spa goodies such as sheet masks, nail polish and lotions for the entire family to enjoy. Sip on some refreshing signature cucumber spa water to complete the experience!
Head To The Beach
If you live somewhere near a beachy coastline like California, now is a great time to get outside! Being in an outdoor environment ensures safety while crowds will be widely dispersed. Make sure to being games, a blanket and snacks! Not only will everyone have a great time, but it is an opportunity to be physically active while chasing a frisbee or throwing a football back and forth.
Plan A Game Night
There is nothing like a good old fashioned game night with the people you love the most! It is a fun way to create memories without having to leave the comfort of your own home. Playing games is a fantastic way to spark creativity from preschoolers to high schoolers. Depending on what you enjoy, there are a variety of games for everyone from card games like Uno and classic choices such as Pictionary.
Visiting a local camp group is a smart alternative to a trip that would include flights and overcrowded environments. Being in mother nature is a great way to provide an escape and soothe unrattled nerves for the whole family. Be sure to bring all your camping essentials, s’mores for roasting and maybe some musical instruments for a sense of adventure around the campfire!
Whether you are staying home or hitting the road during your spring break this year, be sure to make the most of it! We would love to hear where you are heading or what activities you have planned with your family!
Are you looking for date night ideas to spend quality time with your spouse? Do you crave the one-to-one connection with your significant other or just need to feel like you’re doing something special? Do you miss getting dressed up and putting on lipstick? If you answered yes, Educated Nannies have six creative Covid-friendly date night ideas you can plan from home!
That’s right, even during a pandemic! All you need is some creativity, planning, and the intention to carve out some quality time with your significant other. You can plan a date during your child’s nap-time, after the kids are in bed, or if you have older children you can sneak away during online school.
Bring the outdoors into your home! Do you love camping? Making s’more by the fire? Maybe you enjoy stargazing? Transform your living room or backyard into a campsite. Set up a tent, sleeping bags, twinkle lights, your indoor/outdoor grill, and don’t forget the s’mores. If you’re camping indoors, check out our favorite baked s’more dip recipe or campfire scented candles to really make you feel like your camping!
Do a food tour of your favorite city! Are you a foodie? Do you miss traveling? You won’t need to pre-check for this delicious date night. Start your day like a true Parisian and make homemade croissant for breakfast! Travel to Boston for lunch for its traditional Clam chowder or Lobster roll. Maybe you’re in the mood for Chicago’s famous deep-dish pizza or a bagel from New York. Whatever your destination, take it a step further with a visual city backdrop or themed music in the background. This one is sure to make your loved one smile.
Get physical! One of the easiest ways to work on staying active together as a couple is including fitness in your date night plans. Active date ideas burn some calories and help you have fun together while feeling sporty and active. While gyms and yoga studios are closed, hire a trainer or yoga instructor for a private workout or lesson at home. Take an online workout class together. Do simultaneous Peloton classes. Then finish the night off with a full body massage.
Plan a Wine Tasting for Two! Bring Napa Valley to your home with a wine tasting experience. Grab a couple of bottles of red, all different price points and regions, and pair them with a charcuterie board. Want to be a Sommelier for the evening? Wine Folly walks you through the different types of wines, what wines pair well with what food and cheeses, information about where they are from, their regions, tasting notes, and more! It is super easy to follow. All without leaving your house. Enjoy this intimate, edible journey!
Lights, Camera, Action! Turn your living room into an intimate theater for two and you don’t even need to sneak your own Junior Mints into the theater. Enjoy a Romcom, drama, or scary movie. Don’t forget the popcorn, drinks, delicious snacks, cozy pillows, and blankets!
Take an Online Cooking Class with Airbnb Experiences. Are you tired of the same meals? Do you want to try new recipes? Do you enjoy cooking as a couple? Make Mexican street tacos or spice up life with Thai food. Learn authentic recipes with expert hosts around the world with these unique Airbnb cooking experiences. Bon Appétit!
The key to a great date idea is to plan something that speaks to your personal interests. Have you tried any of these date ideas? Do you have any other must-do recommendations for a fun and creative date idea that we missed? Let us know!
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