Quick Answer
The nanny tax applies when you pay a household employee $2,700+ in 2026. You must withhold and pay Social Security, Medicare, and unemployment taxes, plus provide a W-2. Annual costs include 7.65% FICA taxes ($206 on $2,700), federal unemployment tax (0.6% on first $7,000), and potential state requirements.
Best Answer
Sarah Chen, Payroll Tax Analyst
Families hiring nannies, housekeepers, or other household help who need to understand their employer obligations
What triggers the nanny tax?
The nanny tax kicks in when you pay any household employee $2,700 or more during 2026. This threshold applies per employee, not total household help. According to IRS Publication 926, household employees include nannies, babysitters, housekeepers, gardeners, and personal care attendants who work in your home.
Example: $15/hour nanny working 20 hours per week
Let's say you hire a nanny at $15/hour for 20 hours weekly:
Your tax obligations:
How withholding works for household employees
Unlike regular employees, you don't withhold the employee's share of FICA taxes from each paycheck. Instead, you can:
1. Withhold from wages (recommended): Deduct 7.65% from each paycheck
2. Pay both shares yourself: Pay the full 15.3% without deductions
3. Collect separately: Have the employee pay you their share
Most families choose option 1 for simplicity.
State requirements vary significantly
What you must provide
During employment:
Year-end:
Filing requirements
You report nanny taxes on your personal tax return using Schedule H (Form 1040). Key deadlines:
Common mistakes to avoid
What you should do
1. Calculate your annual payments: Add up what you'll pay your household employee
2. Register for an Employer Identification Number (EIN) if you don't have one
3. Set up payroll records or use a household payroll service
4. Check state requirements on your state's labor department website
5. Make quarterly estimated payments if your annual tax liability exceeds $1,000
Use our paycheck calculator to estimate your household employee's take-home pay and your total tax obligations.
Key takeaway: The nanny tax applies when you pay household employees $2,700+ annually, requiring you to pay 7.65% FICA taxes plus federal unemployment tax, with additional state requirements varying by location.
*Sources: [IRS Publication 926](https://www.irs.gov/pub/irs-pdf/p926.pdf), [IRS Schedule H Instructions](https://www.irs.gov/pub/irs-pdf/i1040sh.pdf)*
Key Takeaway: The nanny tax costs about 8.25% of wages paid ($1,235 on $15,000 annually) and requires treating household help as employees with proper payroll procedures.
Annual costs for hiring household employees at different pay levels
| Annual Pay | Employee FICA (7.65%) | Employer FICA (7.65%) | FUTA (0.6%) | Total Employer Cost |
|---|---|---|---|---|
| $2,700 | $206 | $206 | $16 | $2,922 |
| $10,000 | $765 | $765 | $42 | $10,807 |
| $25,000 | $1,913 | $1,913 | $42 | $26,955 |
| $50,000 | $3,825 | $3,825 | $42 | $53,867 |
More Perspectives
Sarah Chen, Payroll Tax Analyst
People who work regular jobs but hire occasional household help and want to understand if they have employer obligations
When occasional help becomes a tax obligation
As a regular employee, you're used to your employer handling payroll taxes. But when you hire household help, you become the employer. The key threshold is $2,700 in 2026 — once you cross this line with any individual worker, you have the same responsibilities as your own employer.
Example: Part-time housekeeper scenario
You hire a housekeeper for 4 hours monthly at $25/hour:
But if you increase to weekly cleaning (4 hours × $25 × 52 weeks = $5,200 annually), you're now subject to nanny tax obligations.
The mindset shift from employee to employer
Unlike your W-2 job where taxes are automatic, you now must:
Many W-2 employees are surprised to learn they can't just pay cash and forget about it once they cross the $2,700 threshold.
Key takeaway: Regular employees hiring household help must think like employers once annual payments exceed $2,700, requiring the same payroll tax responsibilities they're used to their employer handling.
Key Takeaway: Regular employees hiring household help must think like employers once annual payments exceed $2,700, requiring the same payroll tax responsibilities they're used to their employer handling.
Sarah Chen, Payroll Tax Analyst
Families with complex arrangements like live-in help, multiple household employees, or workers who also do independent contractor work elsewhere
Complex household employee arrangements
Unique situations often create confusion about nanny tax obligations. Here are the most common scenarios:
Live-in domestic workers: Must be paid at least minimum wage for all hours worked, with specific rules about sleep time and meal breaks. Room and board can count toward minimum wage requirements but must be valued at fair market rates.
Multiple family arrangements: When multiple families share a nanny, each family applies the $2,700 threshold separately. If Family A pays $4,000 and Family B pays $2,000, only Family A has nanny tax obligations.
Workers with other jobs: A nanny who also works as an independent contractor for other families is still your employee for work done in your home. Their contractor status elsewhere doesn't affect your employer obligations.
Special withholding considerations
High-earning domestic workers: Those earning over $160,200 in 2026 stop paying Social Security tax on wages above this amount, but Medicare tax continues on all wages.
International workers: Those on work visas may have different Social Security agreements depending on their home country. Workers from countries with totalization agreements may be exempt from U.S. Social Security taxes.
Workers under 18: Students under 18 working as household employees are exempt from FICA taxes if domestic service isn't their principal occupation.
Key takeaway: Complex arrangements like live-in workers, shared employees, or international workers require careful analysis of specific rules, but the basic $2,700 threshold and employer obligations remain the foundation.
Key Takeaway: Complex arrangements like live-in workers, shared employees, or international workers require careful analysis of specific rules, but the basic $2,700 threshold and employer obligations remain the foundation.
Sources
- IRS Publication 926 — Household Employer's Tax Guide
- IRS Schedule H Instructions — Household Employment Taxes
Reviewed by Sarah Chen, Payroll Tax Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.