Nanny payroll and the 2026 nanny tax: what you owe and who can run it

The 2026 nanny tax rules in brief

Social Security and Medicare

$3,000 thresholdCash wages to one household employee in 2026

FICA rate

7.65% each side6.2% Social Security + 1.45% Medicare

FUTA

0.6% on first $7,000If you paid $1,000+ in any quarter of 2025 or 2026

Schedule H due

April 15, 2027With your 2026 Form 1040

Those figures come from IRS Publication 926 (2026), the IRS household employer guide (checked October 16, 2026). Once you pay one nanny, housekeeper or caregiver $3,000 or more in cash wages in 2026, you and the worker each owe 7.65% of all of those wages: 6.2% for Social Security, up to the $184,500 wage base, and 1.45% for Medicare, with no limit. You withhold the worker's share from pay and add your own.

• Wages that do not count toward $3,000: pay to your spouse, your child under 21, your parent (with an exception for some parents caring for your child), and any worker under 18 at any time in 2026 unless household work is their main occupation. Being a student does not count as a main occupation.
• FUTA is a separate test: total cash wages of $1,000 or more to household employees in any calendar quarter of 2025 or 2026. The rate is 6.0% on the first $7,000 per employee, cut to 0.6% by the state credit, though employers in credit reduction states pay more (2026 payroll tax rates lists them).
• Federal income tax withholding is optional. You withhold it only if the worker asks and you agree, using Form W-4.

The 2027 household threshold had not been confirmed on the SSA pages we read, although the 2027 Social Security wage base is $192,300.

Worked example: a nanny paid $800 a week for 50 weeks

A full-time nanny at $800 a week for 50 weeks earns $40,000 in 2026. That is far above the $3,000 threshold, and even a quarter with both unpaid weeks still has $8,800 of wages ($800 x 11 weeks), far above the $1,000 FUTA test, so both taxes apply.

Per paycheck that is $49.60 of Social Security ($800 x 6.2%) and $11.60 of Medicare ($800 x 1.45%) withheld each week, matched by the same $61.20 from you. Your federal cost on top of wages is $3,102 for the year, so the nanny costs $43,102 before state unemployment, any state paid leave program and workers' compensation insurance. Run your own figures, including state taxes, in the employee cost calculator.

State unemployment tax for household employers

IRS Publication 926 (2026) tells household employers to contact their state unemployment agency to find out whether they owe state unemployment tax, to check other state employment taxes, and to see whether workers' compensation insurance is required. Some state disability payments also count as wages. The Department of Labor keeps a list of state unemployment agencies.

To show the size of the bill, here is the $40,000 nanny at each state's standard 2026 new-employer rate. Household coverage rules and rates can differ from the business rules in our data, so confirm with your state before you budget.

Massachusetts is one place where the household rule is in our data: workers' compensation covers domestic workers who work 16 or more hours a week. Every state's 2026 wage base and rate range is in SUTA rates by state.

How to set up nanny payroll yourself

You can run household payroll without a service. These are the duties, in the order they come up:

1. Decide whether the worker is your employee. If you control what work is done and how, such as hours, duties and methods, the IRS common-law test usually points to employee, not contractor. Our W-2 vs 1099 guide covers the test.
2. Get an employer identification number and register with your state. You need an EIN for the W-2 and Schedule H, and a state unemployment account if your state covers your household. Also check whether your state requires household employers to report new hires; where it applies, federal law sets a deadline of 20 days after hire, and some states set a shorter one.
3. Withhold 7.65% from each paycheck once wages will pass $3,000. Track the year's total; Social Security and Medicare apply to all cash wages once the threshold is met. Withhold federal income tax only if you both agree, on Form W-4.
4. Pay state unemployment and file state reports on your state's schedule, usually quarterly.
5. Give the nanny a W-2 and file it with the SSA by February 1, 2027. Forms W-2 and W-3 for 2026 household wages are due that day under IRS Publication 926 (2026).
6. File Schedule H with your 2026 Form 1040 by April 15, 2027. It is required if you paid $3,000 or more in Social Security and Medicare wages, paid any FUTA wages, or withheld federal income tax. If you do not otherwise file a return, you file Schedule H by itself.
7. Keep records of every payment, hours and the taxes withheld and paid. Our payroll taxes guide explains each tax.

Nanny payroll services compared

A nanny payroll service runs the paychecks, withholds the taxes, files state reports and prepares the W-2 and Schedule H figures. We compare published prices and terms, and for three of the best-known services we have none.

At $39 a month, SurePayroll's household plan costs $39 x 12 = $468 a year, against the $3,102 of federal employer tax in the example above. Read the SurePayroll review for its wider terms, or see how it stacks up in Gusto vs SurePayroll.

Questions to ask any nanny payroll service

• What is the yearly total? Monthly fee, setup fee, per-employee fee, and any charge for W-2s or year-end filing.
• Who registers the state accounts? Unemployment and, if you withhold it, state income tax.
• Do you file the state quarterly reports, or only calculate them?
• Do you prepare Schedule H, or give me the figures to put on my Form 1040?
• If you file late or wrong, what do you pay? Ask for the guarantee terms in writing: penalties, interest, and any notice deadline. In our business payroll research, most guarantees cover penalties only and exclude errors from data you entered.
• What happens when the nanny leaves or we cancel? How fast the final W-2 is produced and how long you can download past pay records.

The same questions apply to business payroll; compare how providers answer them in best payroll software and the fee detail in what payroll costs.

Common nanny tax mistakes

• Paying a full-time nanny as a contractor. If you set the hours and duties, the worker is usually your employee, and a 1099 does not move the tax to them.
• Missing the FUTA test. It is $1,000 in any quarter, a much lower bar than the $3,000 FICA threshold; a part-time sitter paid $90 a week for 13 weeks ($1,170) already passes it.
• Forgetting the state. Federal rules are only half the job; state unemployment, state paid leave withholding and workers' compensation can apply.
• Withholding income tax without agreeing to it, or assuming it is required. For household employees it is optional.
• Counting the wrong people. A babysitter under 18 whose main occupation is school does not count toward the $3,000, but an adult nanny's wages all count, and once they reach $3,000 the tax applies to every dollar paid that year.
• Missing February 1. The 2026 W-2 is due to the nanny and the SSA by February 1, 2027, two and a half months before Schedule H.

If your household employer duties grow into a small business, see hiring your first employee.