"How much is this going to cost me?" is the fair question every family asks before setting up nanny payroll. The answer is more predictable — and usually smaller — than people fear. Here's the real breakdown of the employer's cost.

Your share of FICA: 7.65%

The biggest piece is your employer share of Social Security and Medicare: 7.65% of your nanny's gross wages (6.2% Social Security up to the annual wage cap, plus 1.45% Medicare). Your nanny pays a matching 7.65%, but that comes out of their wages via withholding — it's not an added cost to you.

Unemployment taxes: FUTA and SUTA

You also pay unemployment taxes, entirely on the employer side:

  • FUTA (federal): 6.0% on the first $7,000 of wages, but a credit for paying state unemployment usually drops the effective rate to 0.6% — about $42 per year at the cap.
  • SUTA (state): rates vary by state and are charged on a state wage base. This is the piece that differs most depending on where you live.
As a rule of thumb, budget roughly 9–11% on top of gross wages for the employer taxes. Your exact number depends on your state's unemployment rate and wage base.

A worked example

Suppose you pay your nanny $30,000 in gross wages for the year. Your employer FICA is about $2,295 (7.65%). FUTA at the effective rate adds roughly $42. State unemployment might add a few hundred dollars depending on your state. Your all-in employer tax cost lands in the neighborhood of $2,600–$3,000 — call it about 10%.

The tax breaks that offset it

Here's what families forget: paying on the books can unlock savings that offset much of the cost.

  • Dependent Care FSA — set aside pre-tax dollars (up to the annual limit) for childcare, saving your marginal tax rate on that money.
  • Child and Dependent Care Credit — a credit on a portion of your qualifying care expenses.
For many families, the FSA and care credit recover a large share of the employer taxes — sometimes most of them. Paying legally can cost far less on net than the sticker number suggests.

Want your exact number? The free nanny tax calculator shows your nanny's take-home pay and your total cost — employer taxes included — for any rate and hours. No sign-up.

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The bottom line

Plan on roughly 10% of gross wages for employer taxes — then remember the FSA and care credit can claw a good chunk of that back. What you should not pay is a payroll service $600 a year to do arithmetic you can automate for free.