Nanny Tax Calculator

The “nanny tax” is the payroll tax a household employer owes when they hire a nanny, housekeeper, or other domestic worker who earns above the annual threshold.
Plenty of families never realise the obligation exists. Skipping it is expensive, because unpaid household employment tax carries the same penalties and interest as any other unpaid federal tax, and it tends to surface years later when the worker files for unemployment or claims Social Security.

Who it applies to. Paying cash does not change anything, and neither does calling someone a contractor. If you set the hours, provide the equipment and say how the work is done, the IRS treats that person as your employee. A nanny in your home is close to the textbook case. A gardener who brings their own tools and works for a dozen households usually is not.

Coverage threshold and rates:

• If you pay one household employee $2,800 or more in a year, you owe household employment tax on all of it. The IRS lifts this figure in $100 steps most years, so confirm the current one in Publication 926 before relying on a borderline number.
• Social Security tax: 6.2% employer + 6.2% employee = 12.4% combined
• Medicare tax: 1.45% employer + 1.45% employee = 2.9% combined
• FICA (Federal Insurance Contributions Act) is the umbrella name for those two together.
• FUTA (Federal Unemployment Tax Act): 6% on the first $7,000 of wages. The standard 5.4% state credit drops the effective rate to 0.6%, so you typically pay about $42/year (it would be $420 without the credit).
• State unemployment insurance: varies by state, roughly 1-5% on the first $7,000 to $47,000 of wages. That one is not federal and this calculator leaves it out.

Formula: Employer-Side Tax = Annual Wages × (6.2% + 1.45%) = Annual Wages × 7.65% Employee-Side Tax = the same 7.65%, withheld from the nanny’s paycheck Total FICA Cost = Annual Wages × 15.3%

Worked example: Nanny earns $30,000 a year.

Employer FICA = $30,000 × 7.65% = $2,295 Employee FICA (withheld) = $30,000 × 7.65% = $2,295 FUTA = $7,000 × 6% × 0.10 (after the state credit) = $42

Total additional employer cost = about $2,337 a year, which is 7.79% on top of the wage.

The 6.2% Social Security piece stops at the annual wage base, $184,500 for 2026. Medicare has no cap. Household wages almost never reach the Social Security ceiling, so for most families the employer side really is a flat 7.65%.

Two things that give the money back:

• Dependent Care FSA (Flexible Spending Account). Money goes in before income tax and before FICA, so the saving is your marginal income-tax rate plus 7.65%. For a family in the 22% bracket that is close to 30 cents on the dollar, which is why the FSA usually beats the credit below.
• Child and Dependent Care Tax Credit. 20-35% of up to $3,000 of qualifying expenses for one child, $6,000 for two or more. You cannot claim the credit on expenses you already ran through the FSA.

File Schedule H with your annual Form 1040. Many families hand the whole thing to a payroll service such as HomePay or NannyChex, which costs a few hundred dollars a year and removes the quarterly paperwork.