Nanny taxes for 2026: when you owe them, what they cost, and the W-2 and Schedule H deadlines
If you pay a nanny, babysitter, housekeeper or caregiver $3,000 or more in cash wages in 2026, you're a household employer and owe "nanny tax": Social Security and Medicare on those wages, and federal unemployment tax once you pay $1,000 in a quarter. This guide covers who counts as your employee, the 2026 thresholds and rates, what it costs on a real salary, overtime, the setup steps, the year-end W-2 and Schedule H deadlines, and the tax breaks that offset part of the cost.
Last updated Oct 30, 2026, from IRS Publication 926 (2026), the IRS child and dependent care credit page, the Social Security Administration and the Department of Labor.
At a glance
- $3,000 threshold: pay one household employee $3,000 or more in cash wages in 2026 and Social Security and Medicare apply to all of it ($3,100 in 2027).
- Cost: 7.65% from you plus 7.65% from the employee, plus a small federal unemployment tax and your state's.
- Income tax withholding is optional for household employees.
- W-2: to your employee and the Social Security Administration by Feb 1, 2027.
- Schedule H: with your 2026 tax return, by Apr 15, 2027.
- Offsets: a dependent care FSA (up to $7,500 from 2026) or the child and dependent care credit (up to 50% from 2026).
Is your nanny your employee?
The IRS test is about control. If you decide what work is done and how it's done, the worker is your employee, even if they work part-time, you call them a contractor, or they're paid hourly. That describes most nannies, house managers and in-home caregivers.
Usually not your employee:
- A worker sent by an agency that controls the work and pays them
- A childcare provider who cares for your child in their own home, like a home daycare
- A self-employed worker with their own business who serves the public, brings their own tools and controls how the job is done
2026 thresholds and rates
| Tax | When it applies (2026) | Rate |
|---|---|---|
| Social Security | $3,000 or more in cash wages to one employee during the year | 6.2% from you and 6.2% from the employee, on wages up to $184,500 |
| Medicare | Same $3,000 threshold | 1.45% from you and 1.45% from the employee, no wage limit |
| Additional Medicare | Wages over $200,000 to one employee | 0.9%, withheld from the employee only |
| Federal unemployment (FUTA) | $1,000 or more in cash wages to all household employees in any quarter of 2025 or 2026 | 6.0% of the first $7,000 per employee, usually 0.6% after the state credit; you pay it, not the employee |
| Federal income tax | Only if your employee asks and you agree | From their Form W-4 |
Once your employee's 2026 wages reach $3,000, Social Security and Medicare apply to every dollar paid that year, not just the amount over $3,000. "Cash wages" means checks, money orders, transfers and cash; food, lodging and clothing you provide don't count. For 2027 the threshold rises to $3,100 and the Social Security wage limit to $192,300.
Who's exempt
Wages you pay to these people don't count for Social Security and Medicare:
- Your spouse
- Your child under 21
- Your parent, unless they care for your child and you're divorced and not remarried, widowed, or married to someone who can't provide the care because of a condition
- An employee under 18 at any time in the year, unless household work is their main job (a student babysitter usually qualifies for this exemption)
The spouse, child under 21 and parent exemptions also apply to federal unemployment tax. The under-18 rule doesn't, so a teen babysitter's wages still count toward the $1,000-a-quarter FUTA test.
What nanny taxes cost: a worked example
Say you pay a full-time nanny $25 an hour, 40 hours a week, for 50 weeks: $50,000 in 2026 wages.
| Withheld from the nanny | You pay | |
|---|---|---|
| Social Security (6.2%) | $3,100 | $3,100 |
| Medicare (1.45%) | $725 | $725 |
| FUTA (0.6% of $7,000) | — | $42 |
| Total | $3,825 | $3,867 |
Your Schedule H for this example would show $7,692: both halves of Social Security and Medicare, plus FUTA. State unemployment tax comes on top and depends on your state's rate and wage base, and some states add disability or paid leave contributions.
Paying the nanny's share yourself? Some families don't withhold and pay the employee's 7.65% themselves. That's allowed, but the IRS treats the amount you pay as extra wages for income tax: it goes in box 1 of the W-2. It isn't counted as Social Security and Medicare wages.
Overtime and minimum wage
- Live-out nannies are covered by federal minimum wage and overtime law: 1.5 times the regular rate for hours over 40 in a workweek.
- Live-in nannies who live in your home (permanently, or at least five days or 120 hours a week) are exempt from federal overtime when a family employs them directly, but still get at least minimum wage for every hour worked.
- Track the hours either way. The Department of Labor requires household employers to record hours worked, including for live-in employees.
- Your state may require more, like a higher minimum wage, daily overtime or overtime for live-in workers.
Since 2025, employees can deduct up to $12,500 of qualified overtime pay ($25,000 if married filing jointly) on their own returns. Overtime is still subject to Social Security and Medicare.
Setting up as a household employer
- Get an EIN (employer identification number) from the IRS. It's free at IRS.gov/EIN, and you need it for the W-2 and Schedule H. Your Social Security number doesn't work in its place.
- Complete Form I-9 with your employee by their first day of work and keep it in your files. Don't send it to the IRS or anyone else.
- Get a Form W-4 only if you've agreed to withhold income tax.
- Register with your state for unemployment tax, and check your state's new-hire reporting, income tax withholding, workers' compensation and paid leave rules.
- Run payroll every payday: gross pay, overtime, Social Security and Medicare withheld once the threshold applies, any income tax you agreed to withhold, and net pay. Many states require a pay stub.
- Pay as you go. Schedule H is due with your return, but to avoid an underpayment penalty you can raise the withholding on your own paycheck or make estimated payments during the year.
Year-end deadlines for 2026 wages
| Deadline | What's due |
|---|---|
| Jan 15, 2027 | Last 2026 estimated tax payment, if you pay Schedule H taxes that way |
| Feb 1, 2027 | Form W-2 to your employee, and Copy A with Form W-3 to the Social Security Administration |
| Apr 15, 2027 | Schedule H with your 2026 Form 1040, and payment of the balance |
| Apr 15, 2027 | Pay your 2026 state unemployment contributions by this date to get the full FUTA credit |
You need a W-2 for each employee you paid $3,000 or more in Social Security and Medicare wages, or whose income tax you withheld. A babysitter under the threshold with no withholding doesn't get one. States have their own quarterly or annual unemployment reports and deadlines.
Tax breaks that offset the cost
- Dependent care FSA: starting in 2026, you can set aside up to $7,500 a year ($3,750 if married filing separately) tax-free through an employer's dependent care FSA.
- Child and dependent care credit: for 2026 the credit is 20% to 50% of up to $3,000 in care costs for one child or $6,000 for two or more, depending on your income. Below $15,000 of adjusted gross income it's 50%; it steps down to 35% and then, above $75,000 ($150,000 married filing jointly), gradually down to a 20% floor.
- The taxes count too. IRS Publication 503 treats the employment taxes you pay on a caregiver's wages as part of your care costs.
You can't use the same dollars for both: money reimbursed through an FSA reduces the costs you can count for the credit.
Nanny shares
In a nanny share where each family pays its own part of the nanny's wages, each family is a household employer for the wages it pays. Each family checks the $3,000 threshold against its own wages, withholds and pays its share of the taxes, and gives the nanny its own W-2. Many shares count overtime on the nanny's total hours across both families and split the premium; check your state's rules and put the arrangement in writing.
Records to keep
Keep payroll records for at least four years after the later of the due date or the date you paid the taxes:
- Your employee's name and Social Security number exactly as on their card
- Hours worked each workweek, and any written agreement on live-in time
- Each payday's gross pay, overtime, withholding and net pay
- Copies of Forms I-9, W-4 (if any), W-2, W-3 and Schedule H
- Your estimated payments or extra withholding toward the household taxes
- State unemployment reports and payments
- Your dependent care FSA claims, and the care costs you counted for the credit
Quick answers
What is the nanny tax threshold for 2026?
$3,000 in cash wages to one household employee during 2026. For 2027 it's $3,100. Federal unemployment tax has a separate test: $1,000 in cash wages to all household employees in any calendar quarter.
Do I have to withhold federal income tax from my nanny's pay?
No. It's voluntary for household employees: you withhold only if your nanny asks and you agree, using their Form W-4. Social Security and Medicare withholding is required once the threshold applies.
When is the nanny's W-2 due?
For 2026 wages, by February 1, 2027, both to your employee and, with Form W-3, to the Social Security Administration.
Do I owe nanny tax for a teenage babysitter?
Usually not for Social Security and Medicare: wages to an employee under 18 don't count unless household work is their main job. Their wages still count toward the $1,000-a-quarter federal unemployment test.
Can I treat my nanny as an independent contractor and send a 1099?
Not if you control what work is done and how, which is the case for most nannies. A nanny who works in your home on your schedule is generally your employee.
Tools to keep nanny payroll simple
Nanny Payroll and Household Tax Tracker
Works out overtime, Social Security and Medicare withholding and pay stubs, tracks the $3,000 and FUTA thresholds, and fills in the year-end W-2 boxes and Schedule H. In Google Sheets or Excel.
See it on Etsy (opens in a new tab)Nanny Share Cost Split Calculator
Splits the nanny's pay, overtime and shared costs between two or three families, tracks each family against the thresholds and shows who owes whom.
See it on Etsy (opens in a new tab)Sources
- IRS Publication 926 (2026), Household Employer's Tax Guide (opens in a new tab) (thresholds, rates, exemptions, withholding, W-2 and Schedule H dates, EIN, I-9, records, overtime deduction)
- Social Security 2027 fact sheet (opens in a new tab) (2027 domestic employee threshold and wage base)
- IRS: Child and dependent care credit information (opens in a new tab) (2026 credit rates and the $7,500 dependent care benefit limit; updated Oct 15, 2026)
- IRS Publication 503, Child and Dependent Care Expenses (opens in a new tab) (employment taxes as care expenses)
- DOL Fact Sheet #79B: Live-in domestic service workers (opens in a new tab) (overtime, minimum wage and recordkeeping)