Nanny Taxes

Frequently Asked Questions

• Nanny/Housekeeper FAQ List
• Elder Care FAQ List
• Preguntas En Español
• World Bank/IMF/OAS/IADB/UN

I have a domestic (nanny, elder care giver, housekeeper) working in my home. What taxes do I need to pay?

In general, the Internal Revenue Service requires payroll tax filings by a domestic employer (household employer) who pays a household employee more than $1700 (2009 &2010)* cash wages in a calendar year. These nanny payroll taxes are collectively referred to as "nanny taxes", although as a practical matter these employment taxes are applied to all US employees. The employer's nanny payroll tax obligations may include:

• Social Security & Medicare Taxes (7.65% of Gross Wages) [FICA taxes]**
• Federal Unemployment Tax (FUTA) (0.8% of Gross Wages or less in Most Circumstances)
• State unemployment and disability insurance taxes levied on the employer.
• Advance payment of the earned income credit for eligible employees.

Examples of job titles that are typically considered household employees include nanny, babysitter, companion, housekeeper, cleaning lady (individual), maid, cook, personal assistant, household manager, caretaker, butler, valet, and driver. We provide more information about distinguishing a household employee from an independent contractor here.

(* The wage payment threshhold that obligates a family to pay the nanny taxes is indexed and has changed many times over the years. The 2008 thresshold is $1600.)

(** The FICA taxes are shared between employer and employee. Each party contributes 7.65%. If the family fails to collect this tax via payroll deductions from the employee, the family will be liable for both the employer and employee portions of the tax or 15.3% of gross wages.)