Nanny tax guide 2026: What household employers must pay and file

Most families are not tax experts. So when it’s time to hire a caregiver — especially if it’s your first time — knowing all the ins and outs of nanny taxes can feel confusing and overwhelming.

In the most simple terms, if you pay a nanny $3,000 or more in cash wages in a calendar year, you are a household employer. That means your nanny is considered an employee, not an independent contractor, and you must withhold and pay Social Security, Medicare and other taxes, as well as report everything on Schedule H, provide your nanny with a W-2 and meet several more obligations — unless, of course, you have a tax and payroll service that’s already handled everything for you.

Here’s what you need to know about household employment taxes, or nanny taxes as they’re commonly called, and how to cover all the bases for tax year 2026.

What are nanny taxes?

Nanny taxes are a combination of federal and state tax requirements detailed in IRS Publication 926 that families must manage when they hire a household employee, such as a nanny, senior caregiver or personal assistant. Nanny taxes include:

• Taxes withheld from the employee: Social Security & Medicare taxes (FICA), as well as federal and state income taxes.
• Taxes paid by the employer: Social Security & Medicare taxes, as well as federal and state unemployment insurance.

For the 2026 tax year, nanny taxes come into play when a family pays any household employee $3,000 or more in a calendar year (or $1,000 or more in a calendar quarter for unemployment insurance taxes).

Note: Your obligations will vary depending on where you live. Not all states have income taxes, while others require additional taxes to be withheld from your employee, paid by the employer or both. To see the specific requirements where you live, visit the nanny tax page for your state.

What are the tax implications of a nanny share?

In a nanny share arrangement, it’s important to understand that both families involved are considered employers according to IRS guidelines. As such, both families have certain tax responsibilities. This includes obtaining federal employer identification numbers (EIN) and registering with the state. Each family is required to pay Social Security and Medicare (FICA) taxes, as well as federal and state unemployment taxes. 

Is your nanny an employee or an independent contractor?

According to the IRS, a household worker is an employee if you control not only what work is done, but also how it is done. Generally speaking, that means the employee is coming to your home on the schedule you dictate while following your rules.

Read more:

Household employers shouldn’t give a 1099 to a nanny or caregiver

For classification purposes, it doesn’t matter whether the work is full-time, part-time or if you hired the worker through an online platform. They are still considered a household employee subject to taxes if you pay them more than $3,000 per calendar year. Families that misclassify their nanny or caregiver as an independent contractor by providing a Form 1099 for filing taxes can be charged with tax evasion.

How to pay nanny taxes

Now let’s get into the process of actually managing and paying nanny taxes. If you a comprehensive tax and payroll service like Care.com HomePay, the following steps are already taken care of. If you handle nanny taxes on your own, there are four main action items that you need to complete:

1. Apply for Tax ID numbers: You need both federal and state tax identification numbers in order to report your nanny taxes. You can get your federal employer identification number (FEIN) from the IRS and use this number to obtain your state identification number from the appropriate tax agency in your state.

2. Calculate and track payroll: You need to accurately calculate your nanny’s gross pay, overtime pay, the taxes withheld from them and your corresponding employer taxes each pay period. (Use our nanny payroll calculator to help).

3. File tax returns year-round:

   • Typically on a quarterly basis, you will need to file state tax returns. Some states do require monthly or annual filings, so check the details in your area to be sure.

   • You should send 1040 estimated payments to the IRS four times per year.

4. Complete year-end tax forms:

   • You must provide your nanny with a Form W-2 by the end of January each year so they can use it to file their tax return.

   • The Social Security Administration requires you to file Form W-3 and Form W-2 Copy A. This lets them know that you’ve properly withheld FICA taxes from your caregiver and remitted FICA taxes of your own throughout the year.

   • You need to prepare a Schedule H and file it with your federal income tax return.

   • Your state may also require an Annual Reconciliation form, which summarizes the state income taxes you withheld from your nanny.

What household employees need to provide

Before a caregiver begins working for a family, there are three things they need to provide:

1. A Social Security number or an ITIN.

2. A completed Form I-9 with proper identification.

3. A completed federal W-4 form and corresponding state income tax withholding form (if you live in a state with income taxes).

If your employee needs a federal and/or state income tax withholding form, we have up-to-date versions available to download.

Payroll services vs. doing it yourself

The IRS estimates the average family can expect to spend 50-55 hours per year correctly managing the nanny tax process. This includes all the tax requirements listed above, as well as managing your employee’s payroll and responding to any notices sent by the IRS and tax agencies in your state.

Read more:

How to pay nanny taxes yourself: Guide for parents and families

On the other hand, if you pay your nanny using a tax and payroll service, most of the process is simplified and automated. For example, when household employers use HomePay, we take care of setting up tax IDs with the state, filing quarterly returns with the state, providing pay stubs and a W-2 and meeting filing obligations at the end of the year. This means there’s less worry about missed deadlines or being out of compliance.

	Tax and payroll service*	Doing nanny taxes yourself
Cost	Starts at $59 per month.	Free if completing independently; $150 to $400 per hour for a Certified Public Accountant (CPA); $500 to $1,500+ annually for a tax accountant.
Filings handled	Federal and state tax registration, quarterly tax filings, tax withholding calculations and remittances and year-end tax forms.	You are responsible for meeting all payment and withholding requirements and filing deadlines.
Support	Unlimited phone, chat and email support, plus 6-month Happiness Guarantee.	Support and guarantees from tax professionals, if provided.

*Based on services provided by Care.com HomePay as of October 2026.

Common mistakes and tax penalties for paying under the table

Whether you choose to pay your caregiver off the books or accidentally misclassify them as an independent contractor, the consequences can be serious. In some cases, you could be charged with tax evasion and your professional license could be in jeopardy.

At the very least, if your tax returns come under IRS scrutiny, you’ll have to:

• File late tax returns.
• Amend your personal income tax return.
• Pay the back taxes you owe (Social Security, Medicare and unemployment insurance taxes).
• Pay any penalties and accrued interest.

Read more:

Been paying a household employee under the table? It’s never too late to pay legally

What are the benefits of paying nanny taxes?

Both families and their nannies benefit from proper tax reporting. Employers may be eligible for tax breaks to offset the cost of their nanny taxes and have less to worry about if they’re audited by the IRS or the state. Caregivers also gain this peace of mind; plus, it’s easier to qualify for short and long-term benefits like:

• Social Security income and Medicare coverage upon retirement.
• Unemployment benefits if they lose their job due to no fault of their own.
• A verifiable employment history necessary for obtaining auto and home mortgage loans.
• Reduced health care costs via subsidies provided through the Affordable Care Act.

You can use our nanny tax and payroll calculator to estimate your taxes and carefully follow the guidance outlined above. Alternatively, you can consult a tax and payroll service to simplify the process. Nanny taxes are a major responsibility for household employers, but meeting your tax obligations and doing right by your nanny doesn’t have to be a headache.

* The information contained in this article is general in nature, may not be applicable to your specific circumstances, and is not intended to be a substitute for or relied upon as personalized tax or legal advice.