The Nanny Tax: A Plain-Language Guide for Parents
The "nanny tax" is shorthand for the household employment taxes you owe once you pay a nanny $3,000+ a year: mainly Social Security and Medicare (7.65% each side), plus a small federal unemployment tax. It's not a separate tax — it's the same FICA every employer pays, applied to a household.
What the nanny tax actually covers
"Nanny tax" isn't an official IRS term — it's shorthand for the taxes that apply once you're a household employer:
| Tax | Who pays | Typical rate |
|---|---|---|
| Social Security | Both of you | 6.2% each |
| Medicare | Both of you | 1.45% each |
| Federal unemployment (FUTA) | You, the employer | 0.6% on first $7,000/year |
| Federal income tax | Employee, if they opt in | Depends on their W-4 |
| State unemployment / income tax | Varies by state | See our state coverage page |
On a $1,500 gross paycheck, that's roughly $114.75 in Social Security and Medicare from your nanny's pay, and another $114.75 you set aside yourself — plus a small unemployment amount. See exact numbers for your situation.
Who this applies to
Anyone you pay $3,000+ a year (or $1,000+ in a quarter) to work in your home as a nanny, babysitter with a regular schedule, or au pair — regardless of whether you call it a job, a favor, or a family arrangement.
It does not apply to occasional teenage babysitters you pay a small amount here and there, or to daycare centers and preschools, which are their own employers.
What it costs you, roughly
As a rule of thumb, budget an extra 10–12% on top of your nanny's gross pay for your employer-side taxes (mostly your matching FICA share, plus a small unemployment amount). Your nanny's own paycheck is reduced by roughly the same percentage for their FICA share, unless you've agreed to cover both sides yourself.
For an exact number based on your nanny's actual pay and state, use the free calculator instead of guessing — it runs the real math, not a rule of thumb.
How to actually handle it
- Get a free EIN from the IRS (see the EIN guide)
- Agree on pay rate, schedule, and how you'll pay them — Venmo, Zelle, Cash App, check, whatever you already use
- Track hours each pay period and calculate gross-to-net pay
- Set aside your employer-side taxes as you go, rather than facing them all at tax time
- File Schedule H with your tax return and issue a W-2 by January 31
This is exactly what Sadie's calculator automates — you enter the hours, it does the math.
Frequently asked questions
Do I have to pay the nanny tax if I only hire for the summer?
If total pay for the year crosses $3,000, yes — the threshold is annual, not based on how many months you employed them.
Can I just give my nanny more money instead of dealing with this?
That doesn't remove the requirement — it usually just means you paid under the table, which carries real risk if discovered later, and doesn't give your nanny credit toward Social Security or unemployment.
Does the nanny tax apply to a housekeeper or caregiver too?
Yes — the same $3,000/$1,000 test applies to any household worker, not just nannies.
Related guides
Household Employer Guide: Are You One, and What It Means
You're a household employer if you pay a nanny, housekeeper, or caregiver more than $3,000…
Social Security and Medicare (FICA) for Household Employees
Once you pay a household employee $3,000 or more in a calendar year, Social Security (6.2%…
Federal Income Tax Withholding for Household Employees
Federal income tax withholding is optional for household employees — you're not required t…
FUTA and State Unemployment Tax for Household Employers
Federal unemployment tax (FUTA) applies once you've paid a household employee $1,000 or mo…
See your real number, not a rule of thumb.
Enter your nanny's rate and hours into Sadie's free calculator and see gross pay, take-home pay, and your true cost — instantly, no account needed.
This guide is general information, not tax or legal advice. Rules vary by state and change over time — confirm anything specific to your situation with a licensed professional or your state's labor department.