Au Pair Tax Deduction: Credit Value, FSA, and Employer Taxes

There is no straight tax deduction for hosting an au pair, but the weekly stipend you pay counts as a qualifying childcare expense for the federal Child and Dependent Care Credit, which is what most host families mean when they ask about an au pair tax deduction. The credit runs between 20% and 50% of up to $3,000 in expenses for one child or $6,000 for two or more, scaled by your income.¹ For most families who can afford an au pair, that works out to a credit of $600 to $1,200. Hosting also makes you a household employer, and the payroll obligations that come with that status can quietly eat into the benefit if you ignore them.

Which Au Pair Costs You Can Actually Claim

The weekly stipend is the clearest qualifying expense. The IRS treats it the same as wages paid to any other in-home childcare provider.² Program agency fees paid to the sponsoring organization may also qualify if they were necessary to arrange the care, since the IRS broadly allows expenses required to obtain childcare.

Costs for room, board, clothing, and other personal items you provide to the au pair do not count, even though they are real out-of-pocket spending. The same goes for the required educational component. The State Department requires host families to pay for au pair coursework, but that payment supports the cultural exchange requirement rather than the care of your child, and the IRS draws a line between care-related expenses and other program obligations.

Two limits are easy to miss. You cannot claim expenses for care provided to a child after they turn 13, except for expenses incurred before that birthday. And the au pair cannot be your dependent or your spouse.¹

Who Qualifies to Claim the Credit

Three tests under Internal Revenue Code Section 21 decide whether the credit is available to you at all.³

First, the care has to be for a qualifying person: a dependent child under 13, a spouse who is physically or mentally unable to care for themselves, or a dependent of any age who cannot care for themselves and lives with you more than half the year.¹ Most host families qualify through the under-13 rule.

Second, the expenses must enable you (and your spouse, if married) to work or actively look for work. If one spouse is a full-time student or unable to care for themselves, the IRS treats that spouse as having earned income for this test. Total qualifying expenses cannot exceed the lower earner’s income on a joint return, so a spouse with very little earned income caps what you can claim.⁴

Third, your filing status has to be single, head of household, qualifying surviving spouse, or married filing jointly. Married filing separately is locked out, with a narrow exception for spouses who lived apart for the last six months of the year and meet additional conditions in IRS Publication 503.⁵

You also must report the au pair’s name, address, and taxpayer identification number on your return. The au pair needs either a Social Security Number or an Individual Taxpayer Identification Number; without it, the IRS will reject your claim.¹ Since you issue the W-2, you already have this information.

How Much the Credit Is Actually Worth

Two caps shape the number. The IRS limits qualifying expenses to $3,000 for one child and $6,000 for two or more, regardless of what you actually spent.¹ Total au pair program costs commonly exceed $15,000 a year once you add stipend, agency fees, and room and board, so only a slice of what you spend feeds the calculation.

The percentage applied to that slice depends on your adjusted gross income. The rate starts at 50% for AGI of $15,000 or less and drops one percentage point for every $2,000 of AGI above that, reaching 35% at $45,000. A second phase-down then begins: for single filers, the rate falls one point per $2,000 of AGI above $75,000, bottoming at 20% around $105,000. For joint filers, it falls one point per $4,000 above $150,000, bottoming at 20% around $210,000.³

Most families who can afford an au pair are above $150,000 combined, which lands them at the 20% floor. That means a maximum credit of $600 for one child and $1,200 for two or more. The credit is also nonrefundable: it can reduce your federal tax to zero but no further, and any excess is lost rather than carried forward.

If You Also Use a Dependent Care FSA

If your employer offers a Dependent Care Flexible Spending Account, you can set aside pre-tax dollars to cover the au pair’s stipend. For 2026, the maximum household contribution is $7,500, or $3,750 if you are married and file separately.⁶

FSA contributions directly reduce the expenses you can run through the Child and Dependent Care Credit. Contribute $5,000 to a dependent care FSA with two qualifying children and your $6,000 expense cap shrinks to $1,000. At the 20% rate, that leaves a $200 credit. For higher earners, the FSA usually delivers a bigger tax benefit than the credit because it shelters income from both income tax and payroll tax, so many host families max out the FSA and accept a smaller or zero credit. The right call depends on your marginal rate and your total childcare spending.

The Employer Taxes You Owe for Hosting

Claiming the credit is the benefit. Household employer status is the obligation attached to it, and the IRS does not treat it as optional. Hosting an au pair makes you an employer regardless of the cultural-exchange framing of the J-1 visa.² You will need a federal Employer Identification Number before you can issue W-2s or report employment taxes; the online application through the IRS is free and immediate.⁷

Social Security and Medicare

Au pairs on J-1 visas who are nonresident aliens for tax purposes are exempt from Social Security and Medicare taxes, because their U.S. days generally do not count toward the substantial presence test.⁸ For non-student J-1 holders like au pairs, this nonresident period runs for the first two calendar years of U.S. presence.²

One exception matters. If your au pair previously spent time in the United States under an F, J, M, or Q visa as a student, teacher, or researcher, those earlier days can count toward the substantial presence test and make the au pair a resident alien sooner. If that happens, you owe FICA for any pay period after the au pair becomes a resident, provided the annual wage threshold is met. For 2026 that threshold is $3,000 in cash wages per household employee.⁹ The combined FICA rate is 15.3%, split 7.65% each between you and the employee (6.2% Social Security plus 1.45% Medicare).¹⁰

Federal and State Unemployment

FUTA applies if you pay $1,000 or more in cash wages to all household employees combined in any calendar quarter.¹¹ Most host families hit that in the first few weeks. The rate is 6.0% on the first $7,000 of wages per employee, but paying state unemployment on time earns a credit of up to 5.4%, bringing the effective federal rate to 0.6%, or at most $42 per au pair per year.¹² FUTA is not exempt under the J-1 visa. State unemployment insurance also applies in every state and typically runs 2% to 4% for new employers; check your state labor department for the registration rules.

Federal Income Tax Withholding

You are not required to withhold federal income tax from the au pair’s wages. Withholding happens only if the au pair asks and you agree, in which case the au pair gives you a completed Form W-4.² The stipend is still taxable income to the au pair, who is responsible for filing their own U.S. return.

Forms That Pull It All Together

You claim the credit by attaching Form 2441 to your Form 1040. Part I is where the au pair’s name, address, and taxpayer ID go; Part II calculates the credit; Part III handles any employer-provided dependent care benefits, which must be completed before Part II if they apply.⁵

Your household employment taxes go on Schedule H, which also attaches to the 1040.¹³ For a FICA-exempt J-1 au pair, you will usually calculate only FUTA there. If the au pair became a resident alien and crossed the wage threshold, FICA goes on Schedule H as well. The Schedule H total is added to your Form 1040 tax liability, so budget for it when estimating payments.

Finally, you issue Form W-2 to the au pair, reporting total wages in Box 1 and any federal income tax withheld in Box 2. For a FICA-exempt au pair, Boxes 3 through 6 stay blank. The W-2 must reach the au pair by January 31, and Copy A plus a transmittal Form W-3 goes to the Social Security Administration by the same date.²¹⁴

1
Internal Revenue Service. Topic No. 602, Child and Dependent Care Credit
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Internal Revenue Service. Au Pairs
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Office of the Law Revision Counsel. 26 U.S. Code 21 – Expenses for Household and Dependent Care Services Necessary for Gainful Employment
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Internal Revenue Service. About the Child and Dependent Care Credit
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Internal Revenue Service. Instructions for Form 2441
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FSAFEDS. Message Board
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Internal Revenue Service. Employer Identification Number
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Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes
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Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
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Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
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U.S. Department of Labor. Unemployment Insurance Tax Topic
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Internal Revenue Service. Topic No. 759, Form 940 – Employers Annual Federal Unemployment (FUTA) Tax Return Filing and Deposit Requirements
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Internal Revenue Service. About Schedule H (Form 1040), Household Employment Taxes
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Social Security Administration. Checklist for W-2/W-3 Online Filing