Calculate what a nanny or household employee really costs: payroll taxes (Social Security, Medicare, FUTA), net pay, and your total annual employer cost.
If you pay state unemployment insurance tax on your nanny's wages, you can claim the 5.4% FUTA credit — cutting the federal rate from 6.0% to an effective 0.6% (max $42 per year). If unchecked, FUTA is calculated at the full 6.0% (max $420 per year).
📋 If you paid a household employee $2,700 or more in cash wages in 2024 or 2025, you generally must withhold and pay Social Security and Medicare taxes ("nanny tax") and report them on Schedule H (Form 1040) with your personal tax return.
| Item | Amount | How It's Calculated |
|---|---|---|
| Gross pay (per period) | $0.00 | Your agreed wage per pay period |
| Employee Social Security | $0.00 | 6.2% of gross, withheld from pay |
| Employee Medicare | $0.00 | 1.45% of gross, withheld from pay |
| Federal income tax withheld | $0.00 | Optional withholding, per period |
| Net pay (take-home) | $0.00 | Gross − employee deductions |
| Employer Social Security | $0.00 | 6.2% of gross, paid by you |
| Employer Medicare | $0.00 | 1.45% of gross, paid by you |
| Employer cost (per period) | $0.00 | Gross + employer SS & Medicare |
| FUTA (annual) | $0.00 | 6.0% of first $7,000 − 5.4% credit if state UI paid |
| Total annual employer cost | $0.00 | Annual gross + annual employer taxes + FUTA |
Situation: You pay your nanny $800.00 every week and you pay state unemployment tax on her wages.
Calculation: Employee Social Security = $800.00 × 6.2% = $49.60. Employee Medicare = $800.00 × 1.45% = $11.60.
Calculation: Net pay = $800.00 − $49.60 − $11.60 = $738.80. Your employer cost = $800.00 + $49.60 + $11.60 = $861.20 per week.
Calculation: FUTA = $7,000.00 × 0.6% = $42.00 per year (state credit applied). Annual gross = $800.00 × 52 = $41,600.00.
Situation: You pay a housekeeper $600.00 every two weeks but do not pay state unemployment tax.
Calculation: Employee taxes = $600.00 × 6.2% + $600.00 × 1.45% = $37.20 + $8.70 = $45.90. Net pay = $600.00 − $45.90 = $554.10.
Calculation: Employer cost per period = $600.00 + $45.90 = $645.90. Annual gross = $600.00 × 26 = $15,600.00.
Calculation: No FUTA credit, so FUTA = $7,000.00 × 6.0% = $420.00 per year (the $420 cap).
Situation: You pay your nanny $1,200.00 twice a month, withhold $50.00 of federal income tax per period, and pay state unemployment tax.
Calculation: Employee Social Security = $1,200.00 × 6.2% = $74.40. Medicare = $1,200.00 × 1.45% = $17.40.
Calculation: Net pay = $1,200.00 − $74.40 − $17.40 − $50.00 = $1,058.20.
Calculation: Employer cost per period = $1,200.00 + $74.40 + $17.40 = $1,291.80. FUTA = $42.00/yr. Annual gross = $1,200.00 × 24 = $28,800.00.
Gross = wages paid per period (cash wages, bonuses, and paid time off generally count).
Annual Gross = Gross × periods per year (52, 26, 24, or 12).
FUTA credit = 5.4% of the first $7,000, only if you pay state unemployment tax — effective rate 0.6%, max $42/year.
No credit: full 6.0% rate applies — max $420/year.
| Item | Rate / Rule | Notes |
|---|---|---|
| Social Security | 12.4% total | 6.2% withheld from employee + 6.2% employer match; wage base $168,600 (2024) / $176,100 (2025) |
| Medicare | 2.9% total | 1.45% employee + 1.45% employer; no wage cap (extra 0.9% employee-only above $200,000) |
| FUTA | 6.0% | On the first $7,000 of wages; 5.4% credit if state unemployment tax is paid → 0.6% effective, max $42/year |
| Schedule H | File with Form 1040 | Report and pay household employment taxes annually on Schedule H — no quarterly 941 filings needed |
| $2,700 threshold | 2024 & 2025 | Cash wages of $2,700 or more in a calendar year trigger the nanny tax (Social Security and Medicare) |
| W-2 requirements | Issue by Jan 31 | Furnish a W-2 when cash wages were $2,700 or more, or if you withheld any federal income tax |
Rates and thresholds are set by the IRS each year — always confirm the current figures before filing. FUTA applies when you paid total cash wages of $1,000 or more in any calendar quarter.
At $800.00 per week with state unemployment tax paid: employee Social Security is $49.60, employee Medicare is $11.60, and net pay is $738.80. Your employer cost is $861.20 per week ($800.00 + $61.20). Annual gross is $41,600.00, FUTA is $42.00, and the total annual employer cost is $44,824.40.
All cash payments for household work count toward the $2,700 threshold — including bonuses, holiday gifts in cash, and paid time off.
The value of meals and lodging provided for your convenience as the employer is generally not counted as cash wages for the nanny tax.
Occasional non-cash gifts (like a birthday present) are not wages. But regular cash payments are wages no matter what you call them.
Below $2,700 of cash wages in a year, no Social Security or Medicare tax is due. At or above it, the full nanny tax applies to all covered wages.
If you hire someone to work in your home — a nanny, babysitter, housekeeper, gardener, or driver — you may be a household employer. The IRS treats you like a small business for payroll purposes: you must withhold Social Security and Medicare from your employee's pay, match those taxes yourself, and pay federal unemployment (FUTA) tax. This package of obligations is commonly called the "nanny tax." It's reported once a year on Schedule H (Form 1040), which you attach to your own personal tax return — no separate business return or quarterly payroll filings are required.
A worker is your household employee if you control what, how, and when the work is done. Nannies, regular babysitters, housekeepers, cooks, gardeners, and drivers all qualify. Independent contractors (like a lawn service you hire by the job) do not.
Social Security (6.2% each side), Medicare (1.45% each side), and FUTA (6.0% of the first $7,000, usually cut to 0.6% by the state credit). Federal income tax withholding is optional — you and your employee agree on it.
For 2024 and 2025, you must pay nanny taxes when cash wages reach $2,700 or more in a calendar year. Below that line there's no Social Security or Medicare obligation — though FUTA starts once total cash wages hit $1,000 in any calendar quarter.
You report all household employment taxes on Schedule H, filed with your personal income tax return. The IRS totals the taxes and adds them to your income tax bill — you don't need an employer identification number for most household employers.
Paying a household employee legally is simpler than most people expect — the work happens once a year, not every payday. Set up a routine, withhold the right amounts, and handle your paperwork on Schedule H and the W-2. Many families also use a payroll service that calculates and files everything automatically for a small monthly fee.
You don't need an EIN just to file Schedule H, but you do need one to issue a W-2 or register with your state. It's free from the IRS and takes about five minutes online.
Most states require household employers to register for state unemployment insurance and workers' compensation. Requirements vary widely, so check your state's labor and revenue agencies.
Withhold 6.2% Social Security and 1.45% Medicare from each paycheck, then match the same amounts yourself. Add optional federal income tax withholding if you and your employee agree.
Report everything on Schedule H with your Form 1040 by April 15, and give your employee a W-2 by January 31. Keep payroll records for at least four years.
⚠️ Important: Household employers have legal payroll obligations — withholding Social Security and Medicare, paying FUTA, filing Schedule H, and issuing W-2s. Paying a nanny under the table can create significant liability, including back taxes, penalties, interest, and state unemployment claims. This calculator provides estimates for educational purposes using 2024–2025 federal rates and thresholds; it is not tax, legal, or payroll advice. Consult a payroll professional or qualified accountant to make sure you're fully compliant.