Nanny payroll Household employer taxes for a family

Is your nanny your employee?

Usually, yes. IRS Publication 926, the Household Employer’s Tax Guide for 2026, gives the test. The worker is your employee if you can control not only what work is done, but how it is done. You set the hours, the duties, and the house rules. That is a nanny, a housekeeper, a cook, or a caregiver working in your home.

It does not matter that the job is part-time, or that you call the person a contractor. Independent contractor vs employee walks the general test.

There is one common case where the worker is not yours. Publication 926 says that if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee. The agency handles payroll. A babysitter you find through an app or a neighbor is usually not that case.

The 2026 dollar lines

Household payroll has its own thresholds. They are not the business ones.

A nanny paid $300 a week for 10 weeks has $3,000 in cash wages. That crosses the Social Security and Medicare line. The same $3,000 in one quarter also crosses the $1,000 unemployment-tax line.

Wages that do not count

Publication 926 leaves out wages paid to some family members and young workers when you count toward the $3,000 line.

• Your spouse
• Your child under 21
• Your parent, unless the parent cares for your child under 18 and one of the other conditions in Publication 926 applies
• Any worker under 18 during the year, unless household work is that person’s main job. A high school student who babysits after class is the usual example of the exclusion. A 17-year-old whose principal job is caring for your children is not.

Social Security and Medicare

Once you cross $3,000, you owe both shares. The worker’s share is 6.2 percent for Social Security and 1.45 percent for Medicare. Your share is the same again. Publication 926 caps Social Security wages at $184,500 for 2026. Medicare has no cap.

You can take the worker’s share out of each paycheck. Some families pay it themselves instead, as a benefit. If you do, Publication 926 says the amount you pay counts as wages for income tax. It does not count as Social Security, Medicare, or FUTA wages. Decide which way before the first payday and tell the worker in writing.

Federal unemployment tax

FUTA is the federal unemployment tax. Only the employer pays it. Publication 926 sets it at 6.0 percent of FUTA wages, and wages over $7,000 a year per worker are not taxed. A credit for state unemployment tax you pay usually brings the rate down. Form 940 and FUTA tax explains the credit. A household employer reports FUTA on Schedule H, not on Form 940.

Publication 926 also says to contact your state unemployment tax agency to find out whether you owe state unemployment tax for the worker.

Federal income tax withholding

This is the one tax that is optional for a family. Publication 926 says to withhold federal income tax only if the household employee asks you to and you agree. If you both agree, the worker fills out Form W-4 and you withhold from each check. What is withholding tax covers the tables.

The paperwork, start to finish

1. Get an employer identification number, or EIN. Publication 926 says to include your EIN on the forms you file for a household employee. Your Social Security number is not a substitute.
2. Complete Form I-9 with the worker. Publication 926 says you and the employee each complete the USCIS Form I-9 when you hire a household employee on a regular basis. USCIS is U.S. Citizenship and Immigration Services.
3. Keep payroll records: hours, pay, and what you withheld. The DOL rules below make the hours record important.
4. Pay through the year. Publication 926 gives two ways. Ask your own employer to withhold more income tax from your wages, or make estimated tax payments to the IRS. Either way covers the household taxes so you do not owe them all in April.
5. Give the worker Form W-2. For 2026 wages, Publication 926 says to give copies B, C, and 2 by February 1, 2027. You also send Copy A to the Social Security Administration. How to file W-2 forms covers both steps.
6. File Schedule H. Publication 926 says to attach Schedule H (Form 1040) to your Form 1040. Schedule H adds up the Social Security, Medicare, FUTA, and any income tax you withheld.

A family does not file Form 941 for a nanny. The Form 941 instructions say household employers usually report on Schedule H instead. Form 941 is the business return.

Minimum wage and overtime for a nanny

Tax is one set of rules. Pay is another. The DOL’s Fact Sheet 79B covers domestic workers under the Fair Labor Standards Act, the federal wage-and-hour law.

• A nanny who does not live in your home gets at least the federal minimum wage, and overtime at one and one-half times the regular rate for hours over 40 in a workweek.
• A live-in nanny gets at least the minimum wage for all hours worked. When a family employs a live-in worker directly, the family does not owe federal overtime.
• Live-in means living on your premises permanently, or for an extended period. The fact sheet defines that as five days, or 120 or more hours, in a week, or five days or nights in a row.

The fact sheet says you must track and record all hours worked, including for a live-in worker. The worker can keep the log and give it to you. Your state can set a higher minimum wage and its own overtime rules.

A worked example

Say you pay a nanny $600 a week for 50 weeks in 2026. That is $30,000 in cash wages. These figures are an example you can redo. They are not IRS amounts.

• Worker’s Social Security, 6.2 percent: $1,860
• Worker’s Medicare, 1.45 percent: $435
• Your Social Security and Medicare: the same again, $2,295
• FUTA at the full 6.0 percent on the first $7,000: $420. A state credit can bring that down.

If you take the worker’s share out of each check, you send $4,590 in Social Security and Medicare for the year, plus FUTA. Half of that came from the nanny’s pay. You report it all on Schedule H.

What your state adds

A household employer can also owe state unemployment tax and, in a state with income tax, state withholding if you agree to it. The state pages cover the accounts. California, New York, and Oregon have state income tax and their own registration steps. Texas and Florida take no state income tax, but each still has a state unemployment tax account. Call the state agency and say it is a household employer.

Nanny payroll services and software

You can do this yourself with Publication 926, Schedule H, and a spreadsheet. A payroll service can run the checks, file the W-2, and handle the state account. Check whether a plan supports household employers before you sign up.

The methodology page grades how much state paperwork software takes off your desk. Gusto is one plain link. Patriot is the other service on this site.

Related guide: Oregon Form OA is the yearly state report for an Oregon household employer.