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Nanny taxes explained (2026 guide)

Updated September 18, 2026 · 7 min read

"Nanny taxes" is the informal name for the employment taxes you owe when you hire someone to work in your home. It catches a lot of families by surprise, because paying a nanny casually in cash doesn't make the obligation go away. Here's the plain-English version: when it applies, what you owe, and — importantly — the records that make it painless.

This is general information, not tax advice. Thresholds and rates change every year. Confirm the current figures with the IRS Household Employer rules or a tax professional before you file.

Do you actually owe nanny taxes?

Two questions decide it:

Is the person a household employee? If you control what work is done and how it's done — as you do with a nanny — the IRS generally treats them as your employee, not an independent contractor. (A nanny is almost never a "1099 contractor," and misclassifying one is a common, costly mistake.)
Did you pay them at least the annual threshold? If cash wages to a household employee reach the IRS's annual threshold ($3,000 for tax year 2026), you generally owe Social Security and Medicare taxes on all covered cash wages, not just the amount above the threshold. Exceptions and the Social Security wage base still apply.

There's also a separate, lower quarterly threshold for federal unemployment tax (FUTA). Babysitters under 18, and some casual arrangements, can be exempt — but a regular nanny usually is not.

What you actually owe

Tax	Who pays	Notes
Social Security & Medicare (FICA)	Split — employer ~7.65% + employee ~7.65%	You can withhold the employee share or choose to cover it
Federal unemployment (FUTA)	Employer	Applies once wages cross the quarterly threshold
State unemployment / other	Employer	Varies by state — some also require disability or paid-leave contributions
Federal income tax withholding	By agreement	Federal withholding can be arranged at the employee’s request; state requirements must be checked separately

The practical takeaway: budget for roughly 10%+ on top of gross wages for the employer's share. It's real money, and it's easy to forget when you're only thinking about the hourly rate.

The forms, briefly

EIN — you'll need a federal Employer Identification Number (free from the IRS).
W-2 — give your nanny a W-2 each year (not a 1099).
Schedule H — filed with your personal federal return to report household employment taxes.
State registration — most states require you to register as a household employer.

Many families use a payroll service to handle the filings. Whether you DIY or use a service, everything depends on one thing: good records.

Why record-keeping is the whole game

Every part of nanny taxes — the wage threshold, the FICA calculation, the W-2, overtime compliance — depends on an accurate log of hours worked and amounts paid. If you're reconstructing a year of cash payments from memory in April, you'll either overpay, underpay, or miss the threshold entirely. The fix is boring but decisive: record every payment as you go.

Keep the log from day one. In this guide we compare five ways to do it — notebook, spreadsheet and app.

Keep tax-ready records without the spreadsheet

Paypr logs every hour and every payment per person, and exports a clean CSV of the whole year — exactly what you (or your accountant) need at tax time. Track one person free.

General information only — not tax or legal advice. Nanny-tax thresholds, rates and forms change annually and vary by state; verify the current rules with the IRS or a qualified tax professional.