Nanny taxes in 2026: what families owe and how to pay them

Nanny taxes are the employment taxes you owe when you pay a household employee $3,000 or more in cash wages in 2026. They are mainly Social Security and Medicare taxes (FICA) plus federal unemployment tax (FUTA), and some states add their own. According to the IRS Schedule H form page, you report them on Schedule H, which you file with your Form 1040.

When you hire a nanny directly, there is no agency in the middle handling payroll. That means the household employer paperwork is yours. It sounds bigger than it is.

Think of it as part of hiring someone you trust with your kids. You get to know the person who will help raise them, and you pay them the way any professional is paid.

This guide walks you through the nanny tax rules for 2026. The goal is a nanny paid on the books and a calm yearly routine for your family.

What nanny taxes cover.

Nanny taxes come down to a few questions. Is your nanny your employee, and did you pay enough to cross the IRS thresholds?

If the answer to both is yes, you owe a set percentage of wages to the federal government, and possibly to your state. The sections below explain who counts and when taxes start. They also show what it costs and which family wages don't count.

Your nanny is your employee.

The IRS treats nannies, babysitters, housekeepers, and private nurses who work in your home as household workers. If you control what work is done and how it's done, that worker is your employee. You decide the schedule and how your kids are cared for, so your nanny almost always meets that test.

This holds whether your nanny works full time or a few afternoons a week. What matters is who controls the work.

That's why your nanny gets a W-2 at the end of the year instead of a 1099. A 1099 is for independent contractors who run their own business and set their own terms. Giving one to a nanny who works on your schedule is misclassification, and it can leave you owing back taxes.

Hiring through a platform doesn't change who the employer is. Gathered Hands does not employ nannies, as our safety and screening policy explains. The relationship stays between your family and your nanny, and so does the employer role.

The 2026 thresholds.

Once you know your nanny is your employee, the next question is how much you paid. The IRS household employer guide sets the 2026 line for Social Security and Medicare at $3,000 in cash wages to one household worker. Once you reach $3,000, all of that worker's cash wages for the year count, including the first $3,000.

The threshold is lower than many families expect. As an illustrative example, a sitter you pay $60 a week for 52 weeks earns $3,120, which crosses the nanny tax line for 2026. Part-time care adds up over a year, so track what you pay from the first week.

FUTA has its own trigger. It applies if you pay $1,000 or more in total cash wages to household employees in any calendar quarter of 2025 or 2026. Only the first $7,000 you pay each employee in a year is subject to FUTA.

There is also a ceiling on Social Security tax. For 2026, the Social Security wage base is $184,500, and Medicare tax has no wage limit.

Federal income tax withholding follows its own rule. You aren't required to withhold it from a household employee's pay. You withhold it only if your nanny asks you to and you agree.

What it costs.

Here is how much the nanny tax is under the 2026 IRS rates. You and your nanny each pay half of FICA, while FUTA is yours alone.

To see what that means in dollars, here is an illustrative example calculated from those IRS rates. Say you pay your nanny $25 an hour for 40 hours a week, 52 weeks a year. That comes to $52,000 in annual wages, or $1,000 a week.

• Your FICA share is 7.65% of $52,000, or $3,978.
• Your nanny's FICA share is also $3,978, which you withhold from their pay.
• Your FUTA is 0.6% of the first $7,000, or $42.
• Your federal employer total is $4,020 for the year.

On a weekly paycheck, that looks manageable. You withhold $76.50 from your nanny's $1,000 and add your own matching $76.50 for FICA.

State unemployment tax comes on top of that, and the rate depends on your state. Some states also have their own payroll taxes, so check with your state or a tax professional for the full number.

Your nanny's rate will depend on your area and their experience. For context, the U.S. Bureau of Labor Statistics reports median pay for childcare workers of $16.82 an hour in May 2025. That figure covers the broader childcare-worker category and may not reflect in-home nanny pay.

When you budget, it helps to see every cost in the open. Gathered Hands has flat monthly membership pricing of $29.99 for families, with a $0 placement fee and $0 commission. Beyond wages and that membership, nanny taxes are the main added cost of hiring.

Exceptions that lower what you owe.

Some wages don't count toward the $3,000 Social Security and Medicare threshold. These exceptions come from the same IRS Publication 926 rules. You don't count wages you pay to:

• Your spouse.
• Your child under age 21.
• Your parent, though an IRS exception counts these wages in certain family situations.
• An employee under age 18 at any time in 2026, unless household work is their principal occupation.

That last exception covers many teen babysitters. If the worker is a student, the IRS doesn't consider household work their principal occupation.

These exceptions apply to federal rules. Your state may set its own, so check your state's household employer rules before you skip a payment.

Why paying on the books is worth it.

Paying your nanny through payroll is the legal requirement once you cross the threshold. It also gives your family and your nanny real benefits that cash off the books can't.

Your nanny builds Social Security credits.
The Social Security Administration sets Social Security work credits for 2026 at one credit per $1,890 in reported earnings, up to four a year. Wages paid in cash off the books earn your nanny no credits at all.

You can pay for care with pretax money.
If your employer offers a dependent care FSA, the IRS raised the 2026 dependent care FSA limit from $5,000 to $7,500. You can use that pretax money for eligible care costs, which can include your nanny's wages.

You may qualify for a tax credit.
Under IRS 2025 figures, the child and dependent care credit can be up to 35% of qualifying expenses. Those expenses are capped at $3,000 for one child or $6,000 for two or more (also 2025 figures), separate from the FSA limit.

FSA money and the credit work together.
Expenses you pay through a dependent care FSA reduce the expenses you can count toward the credit. Changes to the credit for 2026 have been reported, so check current IRS guidance or a tax professional before you file.

Your nanny has proof of income.
A W-2 gives your nanny a record they can show when they apply for a lease or a loan. It also helps them claim the Earned Income Credit if they qualify.

You avoid back taxes and penalties.
If unreported wages come to light, you can owe the unpaid taxes plus interest and penalties. Paying as you go keeps that risk off your plate.

Underneath all of this is fairness. Your nanny is a professional who helps raise your kids, and paying on the books is how you show that respect in practice.

How to pay nanny taxes.

Paying nanny taxes takes some setup in your first year. After that, the same routine repeats every year, and it gets quicker each time.

Step by step.

Here is how to pay a household employee and file correctly for 2026. The steps follow IRS Publication 926.

1. Get an employer identification number (EIN). You apply online through the IRS, and you use your EIN on every household employee tax form. Check your state too, since it may require a separate state employer account.
2. Withhold your nanny's share each payday. Take 7.65% for Social Security and Medicare from each paycheck, or agree in advance to pay it yourself. Keep a record of each paycheck and the amount withheld. If your nanny asks you to withhold income tax too, have them fill out a Form W-4.
3. Choose how you'll pay through the year. You can make quarterly estimated payments with Form 1040-ES. You can also have your own employer withhold more from your paycheck using Form W-4. Paying everything with your return is an option too, though it can trigger an underpayment penalty.
4. Give your nanny a W-2. Give your nanny their Form W-2 by February 1, 2027. File Forms W-2 and W-3 with the Social Security Administration by the same date.
5. File Schedule H. Attach Schedule H to your Form 1040 by April 15, 2027. The IRS Schedule H overview says you can file Schedule H by itself if you don't need to file a return.

If you'd rather hand off the math, a payroll service or a tax professional can run these steps for you. You're still the employer, so it helps to know what they're filing in your name.

Keep your employment tax records for at least four years after the taxes are due or paid, whichever is later. That includes your nanny's name, Social Security number, pay dates, wages, and taxes withheld.

Key 2026 deadlines.

These are the dates to put on your calendar for 2026 wages. They come from IRS Publication 926.

Your state may have its own filing dates for unemployment tax and withholding. Look those up when you open your state employer account.

What this means for nannies.

If you're a nanny, you might wonder whether you have to pay taxes too. You do, and when a family pays you on the books, most of the work is done for you.

Your W-2 wages go on your Form 1040 like any employee's pay. Your family withholds your 7.65% share and pays their matching share, so you don't owe self-employment tax on those wages. Each $1,890 you earn in 2026 earns one Social Security credit, up to four for the year.

If a family offers to pay you in cash off the books, it's fair to ask for a W-2 instead. Reported wages are what count toward your credits and give you proof of income for a lease or a loan.

Your pay stays yours, too. Gathered Hands never takes a cut of a nanny's pay, so the rate you agree on is the rate you earn before taxes. If you're looking, you can find nanny jobs with real families whose posts are real and active.

This is the outcome paying nanny taxes protects. A family and a nanny agree on clear terms, and the pay is on the books from day one. If you're a family ready to hire that way, Get started.