How Do I Pay My Nanny?

April 21, 2026

Paying your nanny can be a bit complicated. For example you need to pay a nanny as a household employee, not an independent contractor which is illegal. In practice, that means: get an employer ID number, complete employment paperwork, track hours, withhold/pay required taxes when applicable, and issue a W-2 at year-end. The IRS specifically covers nannies and other household workers in Publication 926 and Schedule H. Wheew! That sounds like a lot. Let’s break it down.

Here’s the basic setup:

  1. Hire them as an employee.
     If you control the schedule, duties, and how the work is done, your nanny is generally a household employee. The IRS’s household employer guidance is the place to start. 
  2. Complete work authorization paperwork.
     You must complete Form I-9 for anyone you hire to work for wages in the U.S. 
  3. Track hours and pay legally.
     Domestic workers generally must be paid at least minimum wage for all hours worked, and many nannies are entitled to overtime over 40 hours in a workweek. 
  4. Handle payroll taxes if you meet the threshold.
     For 2026, if you pay $3,000 or more in cash wages to one household employee during the year, you generally must withhold and pay Social Security and Medicare taxes. The employee share is generally 7.65%, and your employer share is also 7.65%. 
  5. Report it properly.
     Household employment taxes are generally reported on Schedule H with your federal tax return. At year-end, your nanny typically receives a W-2. 
  6. Don’t forget state rules.
     State income tax withholding, unemployment insurance, minimum wage, and overtime rules can be stricter than federal law, so your state may add steps on top of the federal ones. The IRS notes you may also need to handle state unemployment tax. 

The easiest real-world option is to use a household payroll service, such as GTM Payroll Services, so taxes, pay stubs, filings, and the W-2 are handled for you. If you do it yourself, you’ll want an EIN, I-9, a written pay agreement, a timesheet system, and a plan for quarterly or annual tax payments. 

A simple version of what paying looks like each week:

  • nanny submits hours
  • you calculate gross pay
  • withhold any required taxes
  • pay by check or direct deposit
  • keep records of wages and hours
  • file/pay taxes as required
  • send W-2 at year-end 

The one thing I would not do is pay your nanny “under the table,” because that can create tax, labor, and unemployment problems for both of you. The IRS household employer rules are built for exactly this situation. No one wants that hassle!! Make sure you check with us at TLC for more information!