Nanny tax

What It Means

Nanny tax is the everyday name for household employment taxes: the social security, Medicare and federal unemploymentUnemployment benefitsWeekly payments from a state's unemployment insurance program to eligible workers who lose a job through no fault of their own, with rules set by each state. See more (FUTA) taxes that come due when you pay a household employeeHousehold employeeA worker you hire to do household work, such as a nanny or housekeeper, when you control both what work they do and how they do it. See more such as a nanny. The IRS sets out the rules in Publication 926, and you report the taxes on Schedule H with your Form 1040. For 2026, social security and Medicare apply once you pay one household employee $3,000 or more in cash wages during the year. Federal income tax withholding is optional and happens only when you and the employee agree to it.

How People Say It at Work

• "Are we paying the nanny on the books?"
• "Don't forget Schedule H this year."
• "Our accountant says we owe nanny tax."

The Breakdown

Worked example. A family pays a full-time nanny $870 a week for all 52 weeks of 2026, which is $45,240 in cash wages. That $870 is Care.com's 2026 national average, used here only as an example.

What the result means. On top of $45,240 in wages, the family owes $3,502.86 in federal employer taxes for the year, before any state unemployment tax. The $3,460.86 withheld belongs to the nanny's side of the bill: it comes out of her paychecks, and the family reports it along with its own share on Schedule H.

What to do once you're over the line

1. Get an employer identification number (EIN), which you need to fill in Form W-2.
2. Withhold 7.65% from each paycheck for the nanny's share of social security and Medicare.
3. Give the nanny a Form W-2 for the year, using her Social Security number.
4. File Schedule H with your Form 1040. For 2026 wages, that's the return due April 15, 2027.
5. Check your state's unemployment rules, because the federal FUTA credit depends on paying state contributions on time.

Good to Know

The figures on this page come from IRS Publication 926 (2026), and they move most years: the social security and Medicare threshold was $2,800 for 2025 and is $3,000 for 2026. Some wages stay outside social security and Medicare even above the threshold, including pay to your spouse, your child under 21, generally your parent, and a worker under 18 at any point in the year whose main occupation isn't household work (a student counts here). A sitter who looks after your child in their own home, or a worker supplied and directed by an agency, generally isn't your employee at all. For your own situation, read the current edition of Publication 926 or ask a tax professional.

Related Terms and Categories

• Household employee

  A worker you hire to do household work, such as a nanny or housekeeper, when you control both what work they do and how they do it.

• Nanny salary

  What a family pays a nanny, usually quoted by the hour or week. Care.com's 2026 report puts the US average at $21.75 an hour for one child.

• Dependent care FSA

  A workplace account that lets you pay for a child's or dependent's care with pretax pay so you can work; the 2026 limit is $7,500, or $3,750 married filing separately.

Pay, rates and costs