To pay nanny taxes, get an Employer Identification Number, withhold 7.65% of your nanny’s gross wages for Social Security and Medicare and match it yourself once you pay $3,000 or more in 2026, cover the running balance by increasing withholding at your own job or making quarterly estimated payments, then give your nanny a W-2 and file Schedule H with your Form 1040 at year-end. Federal unemployment tax kicks in separately once you pay any household worker $1,000 or more in a calendar quarter. Everything below walks through those steps in the order you’ll actually do them.
When You Owe the Taxes
Two thresholds matter. The first is $3,000 in cash wages to a household employee during 2026: cross it, and you owe Social Security and Medicare taxes on every dollar you paid that employee, starting with the first paycheck. Employer and employee each pay 7.65% of gross wages, split as 6.2% Social Security and 1.45% Medicare. Social Security tax stops at $184,500 in wages for 2026; Medicare has no cap.1Internal Revenue Service. Publication 926 – Household Employer’s Tax Guide2Social Security Administration. Contribution and Benefit Base
The second is $1,000 in total cash wages to household workers in any single calendar quarter, which triggers Federal Unemployment Tax (FUTA). The gross FUTA rate is 6% on the first $7,000 you pay each employee per year, but paying your state unemployment tax on time earns a 5.4% credit, dropping the effective federal rate to 0.6%.3Employment & Training Administration. Unemployment Insurance Tax Topic4Internal Revenue Service. FUTA Credit Reduction
One boundary worth naming: this whole framework assumes your nanny is a household employee, not an independent contractor. Almost every nanny is an employee under the IRS control tests because you set the schedule, the work happens in your home, and you provide the supplies. Treating a nanny as a contractor to avoid payroll taxes exposes you to back taxes, interest, and penalties.5Internal Revenue Service. Independent Contractor (Self-Employed) or Employee?
Set Up Before the First Paycheck
Get an EIN
You need an Employer Identification Number before you can report wages. Apply online through the IRS using Form SS-4 and you’ll get the nine-digit number immediately.6Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
Have Your Nanny Complete I-9 and W-4
Every new hire must complete Form I-9 to verify work authorization. Your nanny fills out Section 1 on or before the first day; you examine original identity documents and complete Section 2 within three business days. Keep the I-9 for three years after the hire date or one year after employment ends, whichever is later.7U.S. Citizenship and Immigration Services. I-9, Employment Eligibility Verification
Have your nanny fill out Form W-4 too. Federal income tax withholding is optional for household employers: you only withhold if your nanny asks you to and you agree. Many families do it anyway so the nanny doesn’t face a large bill at tax time.1Internal Revenue Service. Publication 926 – Household Employer’s Tax Guide
Register With Your State
Most states require household employers to register for a state unemployment insurance account, often before you’ve hit any federal threshold. Your state’s tax agency or labor department will have an online registration portal. Some states also require state income tax withholding, which is not optional the way federal income tax withholding is. Start the registration early; processing can take time.
Withhold and Match Each Pay Period
From each paycheck, withhold 7.65% of gross wages for the employee’s share of Social Security and Medicare. Set aside another 7.65% as your matching employer share. If you’ve agreed to withhold federal income tax, use the tables in IRS Publication 15-T and deduct that separately before writing the net check.1Internal Revenue Service. Publication 926 – Household Employer’s Tax Guide
A quick example. Your nanny earns $800 per week. You withhold $61.20 from her pay, set aside another $61.20 as your match, and hand her a $738.80 net check before any optional income tax withholding. Your weekly cost is $861.20. FUTA adds a small amount on top: at the effective 0.6% rate on the first $7,000 in wages, you owe about $42 per employee for the whole year.
Pay the IRS During the Year
Household employers don’t make the monthly or semiweekly federal payroll deposits businesses do. You report and pay Social Security, Medicare, and FUTA once a year on your personal tax return. But if that annual bill is large enough, waiting until April triggers an underpayment penalty.8Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
Two ways to avoid the penalty. The simpler one is to update your own Form W-4 at your day job and raise your federal withholding by enough to cover the nanny taxes. That extra withholding then offsets your Schedule H balance when you file. The other option is quarterly estimated tax payments using Form 1040-ES.8Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
For most families the W-4 route is easier because there are no separate vouchers or quarterly deadlines to track. Divide your estimated annual nanny tax liability by the number of remaining pay periods at your own job and bump your withholding by that amount.
File the Year-End Forms
Give Your Nanny a W-2
By January 31 following the tax year, give your nanny a Form W-2 showing total wages in Box 1, federal income tax withheld in Box 2, Social Security tax withheld in Box 4, and Medicare tax withheld in Box 6. For the 2026 tax year the deadline moves to February 1, 2027, because January 31 falls on a weekend.9Internal Revenue Service. About Form W-2, Wage and Tax Statement
The name and Social Security number on the W-2 must match your nanny’s Social Security card exactly. Mismatches cause processing errors at the Social Security Administration and can delay the benefits your employee has earned.
Send Copy A and W-3 to the SSA
Send Copy A of the W-2 along with Form W-3 (the transmittal form) to the Social Security Administration by the same February 1, 2027 deadline. The SSA’s Business Services Online portal lets you file electronically, which is faster and cuts down on errors.10Social Security Administration. Checklist for W-2/W-3 Online Filing11Internal Revenue Service. Form W-3 – Transmittal of Wage and Tax Statements
Attach Schedule H to Your 1040
Schedule H is where the household employment taxes land. You total Social Security, Medicare, and FUTA owed for the year, and the amount flows into your personal tax liability on Form 1040. Any extra withholding you did through your own W-4, or any estimated payments you made, offsets the Schedule H balance.12Internal Revenue Service. About Schedule H (Form 1040), Household Employment Taxes
Handle the State Side
State unemployment insurance is typically a quarterly filing. You submit wage details and pay premiums four times a year through your state’s tax agency. Late filings draw penalties and interest that build up quickly, so the quarterly dates deserve calendar space alongside the annual federal ones.
Many states also require workers’ compensation coverage for household employees. Requirements vary: some mandate coverage for any household worker, some only above a weekly hours threshold, and some leave it voluntary. Check with your state’s workers’ compensation board or your homeowner’s insurance carrier, which can often add the coverage as a rider. Even where it’s optional, carrying it protects you from personal liability if your nanny is hurt on the job.
Keep the Records
Hold on to employment tax records for at least four years after filing: pay stubs, records of hours worked, your copies of W-2s and Schedule H, and any W-4s your nanny submitted.13Internal Revenue Service. Employment Tax Recordkeeping
Form I-9 has its own rule: three years after the hire date or one year after employment ends, whichever is later. Store I-9s separately from tax records, because the I-9 is only produced during a work-authorization audit.7U.S. Citizenship and Immigration Services. I-9, Employment Eligibility Verification
Tax Breaks That Offset the Cost
Paying on the books unlocks benefits that off-the-books arrangements forfeit. The child and dependent care credit covers up to $3,000 in care expenses for one child under 13 or $6,000 for two or more qualifying children. You report your nanny’s name, address, and taxpayer identification number on Form 2441 with your return.14Internal Revenue Service. Topic No. 602, Child and Dependent Care Credit
If your employer offers a dependent care flexible spending account, you can pay child-care costs with pre-tax dollars, which reduces your taxable income. You can’t double-dip: expenses run through the FSA can’t also count toward the dependent care credit. Running the numbers both ways usually shows one option saves more depending on your income and the number of children.