Are Household Employers Eligible for the Employee Retention Credit?

The Employee Retention Credit (ERC) is a tax credit designed to provide financial relief to eligible employers affected by the COVID-19 pandemic. As a household employer, you may wonder whether you qualify for this credit.

A household employer is an individual who hires household employees to perform services in or around their private residence. These employees may include nannies, housekeepers, and caregivers. Household employers are generally not eligible for many of the tax credits and deductions that apply to other types of employers.

Unfortunately, household employers are not eligible for the Employee Retention Credit. The ERC is only available to eligible employers who carry on a trade or business during the 2020 or 2021 calendar year and meet other specific criteria, such as experiencing a significant decline in gross receipts or being subject to a government shutdown order.

The IRS has explicitly stated that household employers are not eligible for the ERC. This means that even if you had to reduce the hours or wages of your household employees due to the COVID-19 pandemic, you cannot claim the ERC on your federal tax return.

However, there may be other relief options available to household employers. For example, you may be eligible for the Sick and Family Leave Credit if you provided paid sick leave or family leave to your employees for reasons related to COVID-19. Additionally, you may be able to claim a deduction for certain employment taxes paid on behalf of your household employees.

It’s important to consult with a qualified tax professional to understand your specific situation and determine what options are available to you. While the ERC may not be an option for household employers, there may be other relief programs that can provide much-needed financial assistance during these challenging times.