How Much Do Au Pairs Pay in U.S. Income Taxes?

Au pairs participating in cultural exchange programs in the U.S. have specific income tax obligations. Their J-1 visa status influences how their income is treated for tax purposes. Like other temporary residents, au pairs must navigate U.S. tax laws, which differ from those for permanent residents or citizens. Their taxation involves determining residency status, identifying taxable compensation, and understanding federal and state tax rules.

Determining Tax Residency Status

The first step in understanding an au pair’s tax obligations is to determine their tax residency status in the United States. For U.S. tax purposes, an individual is classified as either a “resident alien” or a “non-resident alien.” This classification dictates which U.S. tax laws apply to their income. A non-resident alien is taxed only on U.S.-sourced income, while a resident alien is taxed on their worldwide income, similar to U.S. citizens.

The Substantial Presence Test (SPT) is the primary method used by the IRS to determine if a foreign national is a resident alien for tax purposes. This test counts days an individual is physically present in the U.S. over the current year and the two preceding calendar years. However, J-1 visa holders, including most au pairs, are considered “exempt individuals” for the SPT for their first two calendar years in the U.S. This means they do not count their days of presence toward the SPT during this initial period.

Due to this exemption, most J-1 visa au pairs are non-resident aliens for their first two calendar years in the United States. This means only U.S.-sourced income is subject to federal tax. If an au pair remains in the U.S. longer than the two-year exempt period or changes their visa status, they may become subject to the SPT and reclassified as a resident alien. This change would alter their tax obligations, requiring them to report worldwide income.

Identifying Taxable Income

Once tax residency status is established, identifying taxable income for an au pair is the next step. An au pair’s compensation includes a cash stipend, which is directly taxable. This stipend amount is agreed upon between the au pair and the host family, often adhering to Department of State guidelines. This cash payment must be reported as gross income for tax purposes.

In addition to the cash stipend, the fair market value of room and board provided by the host family is considered taxable income. While some employer-provided lodging or meals can be excluded under specific circumstances, these criteria are rarely met for au pairs. Therefore, the value of provided housing and food adds to the au pair’s taxable income. Host families are responsible for determining and reporting this non-cash compensation.

Other benefits or allowances provided to an au pair also contribute to their taxable income. This includes educational allowances, often a component of au pair programs, or stipends for travel and other personal expenses. Any payments or reimbursements not directly related to business expenses or exceeding IRS limits for excludable benefits must be included in the au pair’s gross income.

Federal Income Tax Calculation and Special Rules

For non-resident alien au pairs, federal income tax calculations follow rules that differ from those for U.S. citizens or resident aliens. Non-resident aliens are taxed at graduated rates on their U.S.-sourced income, similar to U.S. citizens, but are not eligible for the standard deduction. They may claim certain itemized deductions if they choose to itemize. Most non-resident aliens report their income and calculate their tax liability on Form 1040-NR, U.S. Nonresident Alien Income Tax Return.

Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition, is an important document for au pairs. Even if an au pair has no U.S. source income and owes no tax, they must file Form 8843 to explain their basis for being an “exempt individual” under the Substantial Presence Test. This form helps avoid mistakenly classifying them as a resident alien, which would trigger different tax obligations. Filing this form is required for most J-1 visa holders.

Most J-1 visa holders, including au pairs, are exempt from Federal Insurance Contributions Act (FICA) taxes, which include Social Security and Medicare taxes. This exemption applies for their first two calendar years in the U.S. as a non-resident alien. This means neither the au pair nor the host family needs to pay these payroll taxes on the au pair’s wages during this period. However, if the au pair’s status changes to a resident alien or they remain in the U.S. beyond the two-year exemption, they may become subject to FICA taxes.

Tax treaties between the U.S. and an au pair’s home country can impact their federal income tax obligations. These treaties prevent double taxation and may offer reduced tax rates or exemptions on certain types of income. Some treaties may exempt a portion of an au pair’s income, such as educational allowances or certain wages, from U.S. taxation. Au pairs should consult IRS Publication 901, U.S. Tax Treaties, or a tax professional to determine if a treaty applies and how to claim any benefits.

State Tax Considerations and Payment Methods

In addition to federal income taxes, au pairs may be subject to state income taxes, depending on the state where they reside and work. State tax laws vary, with some states imposing an income tax and others not. States with an income tax may have different rules regarding non-resident taxation, deductions, and exemptions. Au pairs should consult their state’s tax department resources to understand their obligations, as state tax residency rules may differ from federal guidelines.

The method for paying federal and state taxes varies. If a host family treats the au pair as an employee for tax purposes and withholds taxes from their stipend, the au pair receives a Form W-2, Wage and Tax Statement, at year-end. This form details the income earned and taxes withheld.

However, if host families do not withhold taxes, the au pair is responsible for making estimated tax payments throughout the year. For federal taxes, au pairs who do not have enough tax withheld may need to make estimated tax payments using Form 1040-ES, Estimated Tax for Individuals. These payments are made quarterly to the IRS to cover their tax liability. Making timely estimated payments helps avoid underpayment penalties.

Similarly, state estimated taxes need to be paid according to that state’s schedule and forms. The responsibility for calculating and paying taxes rests with the au pair. Understanding whether taxes are withheld or if estimated payments are necessary is important. If the host family does not withhold taxes, the au pair must calculate their expected income and tax liability to determine estimated payment amounts. This ensures compliance with federal and state tax regulations throughout their stay in the U.S.