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Nanny taxes explained (2026 guide)

Updated July 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 more than the annual threshold? If cash wages to a household employee cross the IRS's annual limit (a figure a little under $3,000 in recent years — check the current year's number), you generally owe Social Security and Medicare taxes on those wages.

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
Income tax withholding	Optional	Not required, but many families withhold it as a courtesy

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.

Download Paypr on the App Store

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.