How To Pay A Nanny

If you’ve never paid a household employee before, figuring out how to pay a nanny legally can feel overwhelming. But once you understand the basics, the process is manageable: classify your nanny correctly, track wages, withhold and pay the right taxes, and keep proper payroll records.

Are Nannies Independent Contractors?

In most cases, a nanny is a household employee, not an independent contractor. The IRS says a household worker is your employee if they perform services in or around your home and you control both what work is done and how it is done.

That means a nanny is typically an employee if you set their schedule, assign their duties, provide instructions, and manage how they care for your child. Calling your nanny an independent contractor does not make them one if the working relationship meets the IRS definition of household employment.

If your nanny is a household employee, you may be responsible for household employment taxes, often called nanny taxes. These can include Social Security and Medicare taxes, federal unemployment tax, and applicable state employment taxes. Federal income tax withholding is generally optional unless your nanny asks you to withhold it and you agree.

How Much Are Nanny Taxes?

For 2026, household employers must withhold and pay Social Security and Medicare taxes if they pay a household employee $3,000 or more in cash wages during the year. Social Security and Medicare taxes total 15.3% of cash wages, split between the employer and employee. The employer pays 7.65%, and the employee pays 7.65% through withholding.

Household employers may also owe federal unemployment tax, or FUTA, if they pay household employees $1,000 or more in cash wages in any calendar quarter. FUTA is an employer-paid tax, so it should not be withheld from your nanny’s paycheck. The standard FUTA rate is 6% on the first $7,000 in wages per employee, though employers may qualify for a credit if they pay state unemployment taxes.

You may also need to pay state unemployment taxes and follow state payroll tax rules. State requirements vary, so check your state tax agency’s household employer rules before running payroll.

You generally do not count wages paid to the following people for Social Security and Medicare tax purposes:

• Your spouse
• Your child under age 21
• Your parent, unless specific IRS exceptions apply
• An employee under age 18, unless household work is their principal occupation

If your parent cares for your child, special rules apply. In some cases, those wages may be exempt from Social Security and Medicare taxes, but the exemption depends on your child’s age or care needs and your marital or spousal-care situation. Check IRS Publication 926 or a tax professional before assuming parent-care wages are exempt.

The Benefits Of Paying A Nanny Legally

Paying a nanny legally takes more work than paying cash under the table, but it protects both you and your nanny. It can help you avoid tax penalties, create a clear payroll record, and give your nanny access to important employee protections.

How Much Should A Nanny Get Paid?

How much you should pay a nanny depends on your location, schedule, job duties, and the nanny’s experience. Nanny rates are usually higher in areas with a higher cost of living, and you may need to pay more for specialized experience, infant care, multiple children, or extra household responsibilities.

At minimum, household employees must generally be paid at least the applicable federal, state, or local minimum wage. Many household employees are also entitled to overtime pay under federal or state law, so check wage and hour rules before agreeing to a flat weekly or salary-style payment. The U.S. Department of Labor says domestic service employees are generally covered by federal minimum wage and overtime rules.

When setting your nanny’s pay, consider:

• Your local market rate
• The number and ages of children being cared for
• Your nanny’s experience and certifications
• Whether the job is full-time, part-time, live-in, or live-out
• Whether you need evening, weekend, overnight, or travel coverage
• Additional duties, such as errands, meal prep, cleaning, or transportation
• Overtime, paid time off, mileage reimbursement, and other benefits

Do I Need An EIN Number To Pay A Nanny?

If you hire a nanny as a household employee, you’ll generally need an Employer Identification Number, or EIN, to report and pay household employment taxes.

An EIN is used for tax administration purposes, including filing employment tax forms and issuing your nanny’s W-2. You should not use your Social Security number in place of an EIN for household payroll reporting.

You can apply for an EIN for free through the IRS website. When applying, household employers typically select Sole Proprietor as the legal structure and Household Employer as the reason for applying.

Once you have your EIN, keep it with your payroll records. You may also need to register with your state tax agency for state unemployment insurance, state withholding, or other household employer requirements.

How To Legally Pay A Nanny In 10 Steps

Once you’ve hired a nanny, you’ll need to set up household payroll, track wages, withhold and pay required taxes, and keep accurate records. Here’s how to pay a nanny legally.

The Best Payroll Software For Paying Your Nanny

Nanny payroll software can help household employers calculate wages, withhold payroll taxes, prepare W-2s, file required tax forms, and keep payroll records organized.

Some general payroll providers support household employers, while other services are built specifically for nanny payroll and household employment taxes. The best option depends on how much help you want. Some services offer full-service payroll and tax filing, while others are more DIY.

Nanny payroll options to consider include:

• SurePayroll: Offers nanny payroll with automatic tax filing and is backed by Paychex.
• HomeWork Solutions: Specializes in household payroll, nanny tax compliance, payroll tax filings, and HR support.
• NannyPay: DIY household payroll software that includes W-2, W-3, and Schedule H support.
• Care.com HomePay: Household payroll and nanny tax service from Care.com/Breedlove.

Before choosing a provider, confirm that it supports household employers in your state and can handle the services you need, such as state tax registration, payroll tax filings, W-2s, Schedule H support, direct deposit, workers’ compensation guidance, and year-end forms.

The Bottom Line On Paying A Nanny

Paying a nanny legally helps you stay compliant with tax, wage, and labor rules while giving your nanny proper payroll records and access to employee protections. It also helps you avoid back taxes, penalties, interest, and recordkeeping issues later.

If you’re new to household payroll, you don’t have to handle everything manually. Nanny payroll software or a household payroll service can help calculate wages, track hours, withhold taxes, prepare W-2s, file payroll tax forms, and store records.

The key is to treat your nanny as a household employee from the start: get an EIN, track pay accurately, follow federal and state tax rules, and keep detailed payroll records.