The Complete Guide to Nanny Taxes in 2026

What Are Nanny Taxes?

If you employ a nanny, housekeeper, senior caregiver, or other household worker, you may owe what are commonly called "nanny taxes." These are the federal and state employment taxes that household employers are required to withhold, pay, and report to the IRS and state agencies.

Nanny taxes include the employer's share of Social Security and Medicare (FICA), federal unemployment tax (FUTA), and in most states, state unemployment insurance (SUI). Depending on your state, you may also owe additional payroll taxes such as disability insurance or paid family leave contributions.

Who Must Pay Nanny Taxes?

You are a household employer if you pay a domestic worker $2,800 or more in cash wages during the 2026 calendar year. This threshold is set by the IRS and adjusts periodically for inflation.

Key Points About the Threshold

• The $2,800 threshold applies per employee, not total across all household workers.
• It covers cash wages only -- the fair market value of food and lodging does not count.
• Once you cross the threshold with any single employee, you become a household employer for the entire year.
• Even if you pay less than $2,800, you may still owe FUTA if you pay $1,000 or more in any calendar quarter.

Your Responsibilities as a Household Employer

1. Verify Employment Eligibility

Before your employee starts work, have them complete Form I-9 to verify they are legally authorized to work in the United States. You must examine acceptable identity and work authorization documents in person.

2. Obtain an Employer Identification Number (EIN)

You need an EIN to file employment tax returns. Apply online through the IRS website -- it takes just a few minutes and you receive your number immediately.

3. Withhold and Pay FICA Taxes

As a household employer, you must withhold 7.65% from your employee's wages for their share of Social Security (6.2%) and Medicare (1.45%). You also pay a matching 7.65% as the employer's share. The combined FICA rate is 15.3% of gross wages.

4. Pay Federal Unemployment Tax (FUTA)

FUTA is 6.0% on the first $7,000 of wages per employee. However, you receive a credit of up to 5.4% for state unemployment taxes paid, reducing the effective FUTA rate to 0.6% in most cases.

5. Handle State Requirements

Most states require household employers to register for state unemployment insurance and make quarterly contributions. Some states also require withholding state income tax, workers' compensation coverage, or paid family leave contributions. Requirements vary significantly by state.

6. File Schedule H with Your Tax Return

At year-end, report all household employment taxes on IRS Schedule H, which you attach to your personal Form 1040. This is due by April 15 of the following year.

7. Issue a W-2 to Your Employee

By January 31 of the following year, you must provide your employee with a Form W-2 showing their total wages and tax withholdings. You also file Copy A with the Social Security Administration.

Common Mistakes to Avoid

• Misclassifying your nanny as an independent contractor. The IRS considers household workers to be employees, not contractors. Issuing a 1099 instead of a W-2 can trigger penalties.
• Forgetting state requirements. Federal taxes are only part of the picture. Many states have additional registration, withholding, and reporting requirements.
• Missing quarterly estimated tax payments. If your nanny tax liability is large enough, you may need to increase your own estimated tax payments or adjust your W-4 withholding at your regular job to cover the additional amount.

How NannyLedger Can Help

Managing nanny taxes can feel overwhelming, especially when you factor in state-specific rules across all 50 states. NannyLedger simplifies the entire process by tracking hours, calculating withholdings, generating pay stubs, and providing state-by-state tax compliance guidance -- all for a fraction of what traditional payroll services charge.

Whether you are hiring your first nanny or managing payroll for multiple household employees, NannyLedger gives you the tools and knowledge to stay compliant without the stress.