Nanny Taxes: What You Owe and How to Pay a Nanny Legally

If you pay a nanny $3,000 or more in cash wages in 2026, you owe nanny taxes: Social Security and Medicare at 15.3% of her cash wages, half of it withheld from her pay and half paid by you. You may also owe federal unemployment tax once you pay $1,000 or more in a calendar quarter. You report all of it once a year on Schedule H with your own tax return. Those figures come from IRS Publication 926 for 2026. What follows is general information from that publication, not tax advice. A household payroll service or an accountant can run the numbers for your state.

Is your nanny your employee?

Almost certainly. IRS Publication 926, the Household Employer’s Tax Guide, says a worker is your employee if you can control not only what work is done but how it is done. A nanny who works in your home, on your schedule, following your routines meets that test. The IRS says it doesn’t matter whether the work is full time or part time, or whether you found her through an agency.

That is why calling a nanny an “independent contractor” doesn’t work. A self-employed worker, in the IRS’s description, controls how the work is done, usually brings their own tools and offers services to the general public. The exception the publication names is a worker supplied by an agency that controls what is done and how. Then the agency is the employer.

What you owe in 2026

Every number here is from Publication 926 (2026), loaded in November 2026. They change most years, so re-check the current edition before you rely on them.

A few details that matter in practice:

• Once you cross $3,000, all of the year’s cash wages count, not only the amount above the line.
• “Cash wages” includes checks and money orders. It doesn’t include the value of food or lodging you provide.
• You can pay her half yourself. The publication allows you to cover the employee’s 7.65% from your own funds. If you do, that amount counts as extra wages for her income tax.
• Income tax withholding is optional. You aren’t required to withhold federal income tax. If your nanny asks you to and you agree, she gives you a Form W-4.
• Some people don’t count. Wages paid to your spouse, your child under 21 or, in most cases, your parent are exempt from these taxes. So are wages paid to an employee under 18, unless household work is their main occupation. A student isn’t treated as having household work as a main occupation.

The IRS’s own worked example

Publication 926 walks through a small case. Mary hires Jane to care for her child at $70 every Friday for 48 weeks, $3,360 for the year. That is over the $3,000 line, so:

• Jane’s share: $208.32 Social Security plus $48.72 Medicare, withheld from her pay.
• Mary’s share: the same $208.32 plus $48.72, on top of the wages.

Scale that up to a full-time nanny and you can see why the club tells every family to budget the employer share before making an offer. The gross wage you agree to isn’t your whole cost. The tax section of your nanny contract should say whether the pay figure is gross or take-home.

The year-one calendar

This is how the publication’s checklist plays out across a first year.

Before her first day

• Confirm she can legally work in the US. You and your employee each complete Form I-9.
• Apply for an employer identification number (EIN). The IRS’s online application at IRS.gov/EIN is free.
• Ask for her Social Security number, no later than the first day you pay wages.
• Call your state’s unemployment tax agency. Publication 926 tells household employers to ask about state unemployment tax, other state employment taxes and workers’ compensation insurance.

Every payday

• Withhold her 7.65% (unless you’re covering it), and any income tax she asked for.
• Keep a record of each payment: date, gross, each amount withheld.

During the year

• The taxes are due with your own return, so the bill arrives in one piece. To avoid an underpayment penalty, the IRS suggests either having more tax withheld from your own paycheck with a new Form W-4, or making estimated payments. The 2026 estimated payment dates are April 15, June 15 and September 15, 2026, and January 15, 2027.

By February 1, 2027

• Give your nanny Copies B, C and 2 of Form W-2 for 2026.
• Send Copy A with Form W-3 to the Social Security Administration.

By April 15, 2027

• File Schedule H (Form 1040) with your 2026 federal return and pay what you owe.

Afterwards

• Keep the employment tax records for at least 4 years.

Venmo, cash and “off the books”

The payment app doesn’t decide anything. Whether she is your employee depends on who controls the work, and the tax depends on what you paid her in cash wages over the year. Paying by transfer, by check or in bills gives the same answer.

The publication is blunt about what happens if you skip it: you will generally be liable for the taxes you should have withheld and paid, and interest and penalties may be added.

It costs her too. The publication describes the unemployment tax as part of the program that pays unemployment compensation to workers who lose their jobs, and unreported wages leave her outside it, with no W-2 to show a landlord or a lender. Club families who pay legally say it changes the working relationship. The nanny is a professional with a pay stub, and a nanny who is treated that way tends to stay.

The upside: the child care credit

Publication 926 says that if your household employee cares for a dependent under 13 so that you can work, you may be able to take the child and dependent care credit, and that your share of the employment taxes can count as part of the expense. The credit only works with reported wages. The rules are in IRS Publication 503.

If you share a nanny

In a share, each family usually has its own employer duties for its part of the wage. That setup has its own page: how a nanny share works. If you haven’t hired yet, the club’s search-and-hire plan for finding a nanny puts payroll in step 8, and this page is that step in full.

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FAQ

How much are nanny taxes?

For 2026, Social Security and Medicare come to 15.3% of cash wages once you pay one employee $3,000 or more: 7.65% from her and 7.65% from you. Federal unemployment tax can add 6.0% on the first $7,000 of wages, often reduced to 0.6% by the credit for state unemployment tax. State taxes vary.

Do I have to pay nanny taxes for a part-time nanny?

If her cash wages reach $3,000 in 2026, yes. The IRS says it doesn’t matter whether the work is full time or part time.

What form do I file for nanny taxes?

Schedule H (Form 1040), attached to your own federal return. Your nanny gets a Form W-2 by February 1 of the following year.

Can I just give my nanny a 1099?

Not if she is your employee. The IRS test is control. If you decide what she does and how she does it, she is an employee and gets a W-2.

Do I need a payroll service?

No. Schedule H and a W-2 can be done yourself with Publication 926 open. Many club families pay for a household payroll service anyway, because the state registrations and filings are the fiddly part.