How to Pay Nanny Taxes as a Household Employer: Schedule H and W-2

To pay nanny taxes, you withhold Social Security and Medicare from your nanny’s wages, add a matching employer contribution from your own funds, and report the combined amount on Schedule H attached to your personal Form 1040. For 2026, this kicks in once you pay a single household worker $3,000 or more in cash wages during the year.1Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide You also give your nanny a W-2 in January and file a copy with the Social Security Administration. Federal income tax withholding is optional. State rules run parallel and vary.

First, Confirm Your Nanny Is an Employee

The IRS uses a control test. If you decide not just what work gets done but how it gets done, the person working in your home is your employee. A nanny whose schedule you set, whose tasks you direct, and whose methods you oversee is an employee whether the job is full-time, part-time, or seasonal.2Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide – Section: Do You Have a Household Employee?

An independent contractor controls how the work is performed. A cleaning service that sends its own crew with its own supplies is a contractor. A babysitter you hire directly, tell when to arrive, and instruct on meals and bedtimes is an employee. Getting this wrong exposes you to back taxes, penalties, and interest for every year the worker should have been on payroll.

Get an EIN and Hiring Paperwork in Place

You need a federal Employer Identification Number to file household employment tax forms. Apply online at IRS.gov/EIN for immediate issuance, or send Form SS-4 by fax or mail.3Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN) On Form SS-4, check the “Other” box and write “Household employer” along with your Social Security number.4Internal Revenue Service. Instructions for Form SS-4 (Rev. December 2025) The EIN is only for household employment filings; it does not replace your SSN on your personal return.

Federal law also requires you to complete Form I-9 with your nanny to verify identity and work authorization. Your nanny presents original documents from the acceptable lists, you examine them, and you keep the form on file. It only gets sent to the government if requested.5U.S. Department of Labor. I-9 Central

Have your nanny complete a Form W-4 as well, but note an important detail: withholding federal income tax from a household employee’s wages is entirely voluntary. You only withhold income tax if your nanny asks you to and you agree.6Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide – Section: Do You Need To Withhold Federal Income Tax? Many nannies prefer that you do, since it spares them a large bill at tax time. Social Security and Medicare withholding, on the other hand, is mandatory once you cross the $3,000 threshold.

Most states also require new-hire reporting to a state directory, typically within 20 days of the start date. This feeds child support enforcement systems. Check your state’s rule.

What to Withhold and Match in 2026

Two federal thresholds trigger two separate taxes.

Social Security and Medicare

Once you pay $3,000 or more in cash wages during 2026, you withhold 6.2% for Social Security and 1.45% for Medicare from every paycheck. You match those amounts from your own funds, so the combined rate is 15.3% of wages.1Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide Pay less than $3,000 total for the year, and neither of you owes these taxes on those wages.

Social Security tax applies only to wages up to $184,500 in 2026.7Social Security Administration. Contribution and Benefit Base Medicare has no cap. If you pay one worker more than $200,000 in a year, an additional 0.9% Medicare tax applies to wages above that figure, withheld from the employee’s pay only with no employer match.1Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide

Federal Unemployment Tax

If you pay $1,000 or more in total cash wages to all household employees in any calendar quarter, you owe FUTA tax on the first $7,000 of each employee’s annual wages. The statutory rate is 6%, but a credit of up to 5.4% for state unemployment taxes paid typically drops the effective rate to 0.6%.8Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees – Section: Federal Unemployment Tax Act (FUTA) At that rate, the maximum FUTA cost per employee runs $42 for the year. Small, but you still track and report it.

Paying the Tax During the Year

Household employers are not required to deposit employment taxes throughout the year the way a business does. Your total household employment tax liability is added to your personal income tax return at year end.9Office of the Law Revision Counsel. 26 U.S. Code 3510 – Coordination of Collection of Domestic Service Employment Taxes With Collection of Income Taxes But waiting until April to pay a large amount can trigger an underpayment penalty.

Three practical ways to stay ahead:

  • Increase your own workplace withholding. If you or your spouse has a regular job, submit a new W-4 asking for extra federal tax withholding. This is the simplest option, and withheld wages are treated as paid evenly across the year even when you bump withholding late.
  • Make quarterly estimated payments using Form 1040-ES by April 15, June 15, September 15, and January 15 of the following year.10Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals
  • Pay electronically through EFTPS at eftps.gov. Enrollment takes about a week for the PIN to arrive by mail, so set it up early.

To avoid an underpayment penalty entirely, your total payments for the year (workplace withholding plus estimated payments) must equal at least the smaller of 90% of your 2026 tax or 100% of the tax shown on your 2025 return.11Internal Revenue Service. 2026 Form 1040-ES, Estimated Tax for Individuals When you run that calculation, remember to include the household employment taxes you’ll owe on Schedule H. Forgetting that piece is a common cause of surprise balances due.

Filing Schedule H With Your 1040

Schedule H is the single form that ties everything together. You attach it to Form 1040 (or 1040-SR, 1040-NR, or 1041 for trusts), and the total flows onto Schedule 2, line 9.12Internal Revenue Service. Instructions for Schedule H (2025) – Section: Part III. Total Household Employment Taxes

The form has three parts. Part I calculates Social Security and Medicare taxes, both your share and the withheld employee share, based on total cash wages. Part II covers FUTA if you crossed the $1,000-per-quarter threshold. Part III totals everything and directs you where to enter it on your return.13Internal Revenue Service. About Schedule H (Form 1040), Household Employment Taxes Any federal income tax you withheld voluntarily goes on Schedule H too.

Because Schedule H rides with your personal return, the filing deadline is the same: April 15 for most taxpayers. Extending your return extends Schedule H, but it does not extend the time to pay. Interest still runs on any balance not paid by April 15.

Giving Your Nanny a W-2

By early February each year you owe your nanny a completed Form W-2. For wages paid in 2026, the deadline to furnish the W-2 to your nanny is February 1, 2027. The same date is the deadline to file Copy A along with transmittal Form W-3 with the Social Security Administration.14Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026) – Section: Due Date for Filing With SSA

The critical W-2 figures are total taxable wages (Box 1), Social Security wages capped at $184,500 (Box 3), Social Security tax withheld (Box 4), Medicare wages with no cap (Box 5), and Medicare tax withheld (Box 6). For most single-nanny households paying well under the Social Security cap, Boxes 3 and 5 hold the same figure. If you file electronically through the SSA’s Business Services Online portal, the system generates Form W-3 for you.15Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3

State Taxes Run Alongside Federal

Federal filings are only part of the picture. States are where household employers most often fall out of compliance.

State unemployment insurance is nearly universal. Many states require household employers to register and pay in. Triggering thresholds vary; some mirror the federal $1,000-per-quarter rule and some set their own. The taxable wage base per employee runs from $7,000 to over $78,000, and tax rates are assigned based on your claims history. Contact your state unemployment tax agency to register.

State income tax withholding rules depend on your state. Some follow the federal voluntary approach for household workers; others make withholding mandatory. Your state revenue department will have the specifics.

Workers’ compensation coverage is required in many states once a domestic worker crosses a certain earnings or hours threshold. If your nanny is injured on the job and you lack required coverage, you can face personal liability for medical costs and lost wages plus state fines. Policies for a single household worker are typically modest.

One boundary worth flagging: wage-and-hour law is separate from tax law. Domestic workers must be paid at least the federal $7.25 minimum wage (or a higher state or local minimum), and non-live-in nannies are entitled to overtime after 40 hours in a workweek.16U.S. Department of Labor. Wages and the Fair Labor Standards Act17U.S. Department of Labor. Fact Sheet 79B: Live-in Domestic Service Workers Under the Fair Labor Standards Act (FLSA) Underpaying wages creates a labor problem and also understates the wage base for your tax filings.

Deadlines and Penalties at a Glance

For 2026 wages, the calendar looks like this:

W-2 penalties are per form and scale with lateness: $60 up to 30 days late, $130 from 31 days late through August 1, $340 after August 1 or not filed at all, and $680 for intentional disregard.19Internal Revenue Service. Information Return Penalties Filing your 1040 late brings a separate failure-to-file penalty of 5% of the unpaid tax per month or partial month, capped at 25%.20Internal Revenue Service. Failure to File Penalty The IRS can waive penalties for reasonable cause, but not knowing about the requirement rarely qualifies.

The IRS requires household employers to keep employment tax records for at least four years after filing.21Internal Revenue Service. Employment Tax Recordkeeping Hold onto copies of each Schedule H, W-2, W-3, and your pay-period log. Keep the I-9 for three years after hire or one year after employment ends, whichever is later.

Credits That Offset What You Pay

Compliance opens tax benefits that families who pay off-the-books cannot claim.

The Child and Dependent Care Tax Credit applies when you pay someone to care for a child under 13 (or a dependent unable to care for themselves) so you and your spouse can work. It covers up to $3,000 in expenses for one dependent or $6,000 for two or more, at a credit percentage of 20% to 35% depending on income. That works out to a maximum credit of $2,100 for families with two or more qualifying dependents. Claim it on Form 2441.

A Dependent Care FSA, if your employer offers one, lets you set aside pre-tax dollars for care costs. The 2026 limit is $5,000 for married couples filing jointly ($2,500 if married filing separately). Because FSA dollars come out before Social Security and Medicare are calculated on your own wages, the FSA is often more valuable than the credit for higher earners. You cannot use both benefits on the same dollars, so compare them if your care costs are large.

Neither benefit is available if wages are not properly reported. The savings routinely cover most of the employer share of nanny taxes.