It's the question every family asks quietly: do I actually have to pay nanny taxes? The honest answer for most families who employ a regular nanny is yes — and this guide explains exactly when the rules apply.

The threshold that triggers it

The trigger is a dollar amount of cash wages in a year. Once you pay a household employee $3,000 or more in a calendar year for 2026 (the IRS updates this figure annually — confirm the current number), you owe Social Security and Medicare taxes on those wages and are expected to report them.

  • Under the threshold? If you pay a casual sitter a small amount over the year, FICA may not apply.
  • Over the threshold? You're a household employer with real obligations — withholding, employer taxes, and a year-end W-2.
  • $1,000+ in a single quarter? That separately triggers federal unemployment tax (FUTA).
There are narrow exceptions — for example, wages paid to your spouse, your own child under 21, or your parent (in most cases) aren't subject to these taxes. Most nanny arrangements don't fall into these.

"But everyone just pays cash…"

Plenty of families do — and it's a gamble that mostly stays hidden until it doesn't. The risk surfaces when a nanny files for unemployment, applies for a loan and needs proof of income, or when a caregiver relationship ends badly. At that point, unreported wages become the IRS's business, and the back taxes and penalties land on the employer.

Why paying on the books is worth it

Beyond staying compliant, doing it properly has real upside for both sides:

  • Your nanny earns Social Security and Medicare credits and builds a documented work history.
  • They gain unemployment protection if the job ends through no fault of their own.
  • You may qualify for tax breaks — the Child and Dependent Care Credit or a Dependent Care FSA — that require reported wages.
  • Everyone sleeps better. No quiet worry that a paperwork gap becomes a tax problem.

If you've decided to do it right, House makes it nearly effortless — and free. It handles the withholding math and the year-end forms.

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The bottom line

If your nanny earns more than a modest yearly threshold — and a regular nanny almost always does — the nanny tax applies. The good news is that handling it correctly is straightforward, and it turns a hidden liability into a clean, documented arrangement that benefits your family and your nanny alike.