How to Pay a Nanny

If you're hiring a nanny who will be your household employee, paying them means running payroll: you set a pay schedule, pay by a method that leaves a record, and withhold and pay Social Security and Medicare taxes once their wages reach the year's threshold. After the year ends, you give your nanny IRS Form W-2, Wage and Tax Statement, and report the taxes on IRS Schedule H (Form 1040), Household Employment Taxes, with your personal tax return.

SurePayroll® By Paychex supports payroll and payroll tax management for the people who support your household.

How to set up payroll for a nanny

A household employer pays a nanny the way any employer pays an employee: on a regular schedule, by a method that leaves a record, with the required taxes withheld and paid. Paying a nanny under the table, in currency and without reporting it, doesn't remove the tax obligation. The IRS says an employer who doesn't withhold and pay required employment taxes is generally liable for them, and interest and penalties may also be charged.

Get an employer identification number (EIN). You include your EIN on the forms you file for your household employee, including your year-end forms. An EIN is a nine-digit number the IRS issues, and it isn't the same as your Social Security number. Here's how to get an employer identification number as a household employer.

Decide on federal income tax withholding. You aren't required to withhold federal income tax from your nanny's wages. If your nanny asks you to and you agree, you'll need a completed Form W-4, Employee's Withholding Certificate, so you know how much to withhold from each paycheck.

Set a pay schedule. Choose a weekly, biweekly, semimonthly or monthly pay schedule, and check your state's payday requirements, since some states set how often employees must be paid. Once you know your schedule, give a copy to your nanny so they know when they'll get paid.

Choose how you'll pay. Direct deposit and printed checks both leave a record of each payment, which you'll rely on when you complete year-end forms. Direct deposit puts the funds in your nanny's account on payday without scheduling a handoff, but you can agree on the method that works best for both of you.

SurePayroll flags upcoming bank holidays in your payroll calendar so you can process early and keep your nanny paid on schedule.

Which nanny taxes you owe and when they apply

Nanny taxes are the payroll taxes a household employer pays for a household employee: Social Security and Medicare taxes (FICA) and, in many cases, federal and state unemployment taxes. Social Security and Medicare taxes apply once you pay a household employee $3,000 or more in cash wages in 2026. For 2027, the nanny tax threshold is $3,100. Once a nanny's pay reaches the threshold, all of their cash wages for the year count, not just the amount above it.

Cash wages include wages you pay by check, money order or a similar method, not only currency. They don't include the value of food, lodging, clothing or transit passes you provide, though cash you pay in place of those items does count.

You and your nanny each owe 7.65% of the nanny's cash wages: 6.2% for Social Security and 1.45% for Medicare, or 15.3% combined. You withhold your nanny's share from each paycheck and pay your share from your own funds. You can choose to pay your nanny's share yourself, but the IRS then counts that amount as wages for income tax purposes.

Federal unemployment tax (FUTA) has its own test: it applies if you pay $1,000 or more in total cash wages to all of your household employees combined, not just your nanny, in any calendar quarter of this year or last year. FUTA is 6.0% of the first $7,000 of each employee's cash wages, and you pay it from your own funds rather than withholding it. If you pay your state unemployment tax on time, you may be eligible for a credit of up to 5.4%, which brings the net FUTA rate to 0.6%. The credit is smaller if your state is a credit reduction state.

State unemployment taxes vary by state, so check with your state's unemployment tax agency about whether you owe them and at what rate. Also check whether your state requires other employment taxes or workers' compensation insurance.

Your nanny is responsible for filing their own federal and state income tax returns.

The nanny tax and payroll guide covers the payroll taxes in more detail.

Nanny tax exceptions

You don't count wages you pay to these household employees as Social Security and Medicare wages:

• Your spouse
• Your child under age 21
• Your parent, unless both conditions of the parent exception in IRS Publication 926 are met
• An employee who is under age 18 at any time during the year, unless household work is their principal occupation (a student's household work isn't)

IRS Publication 926, Household Employer's Tax Guide, lists the full conditions, including how they apply to federal unemployment tax.

"Easy to use for us as a household employer, has the flexibility we were looking for, and not too expensive."

— Mike B., Trustpilot

Nanny vs. independent contractor

The IRS uses a control test to decide whether a household worker is your employee: the worker is your employee if you can control not only what work is done, but how it's done. It doesn't matter whether the work is full time or part time. If an agency provides the worker and controls what work is done and how it's done, the worker isn't your employee, and a worker who provides childcare in their own home generally isn't your employee either.

If your nanny meets the employee test, giving them a Form 1099-NEC instead of a Form W-2 doesn't change their status. You'd generally still be liable for the employment taxes you should have withheld and paid. Read more about whether you can pay your nanny as a 1099 worker.

Form W-2 and Schedule H at year-end

If you paid Social Security and Medicare wages or withheld federal income tax, you give your nanny Form W-2 after the year ends and send Copy A to the Social Security Administration with Form W-3, Transmittal of Wage and Tax Statements. Both are due January 31, or the next business day if that date falls on a weekend or legal holiday.

You then report the year's household employment taxes on Schedule H, including FUTA if you owe it, and file it with your personal federal income tax return.

The SurePayroll nanny and household payroll service includes payroll processing, payroll tax deductions, filings, and deposits, as well as year-end forms like Form W-2 and Schedule H.

Nanny payroll with SurePayroll

SurePayroll supports nanny payroll setup, tax filings, and year-end forms for families employing a nanny or caregiver. You run and approve each payroll, and SurePayroll calculates, files, and deposits federal and state household payroll taxes and prepares a signature-ready Schedule H for you to file with your income tax return.

‍See how nanny payroll works with SurePayroll.