Can I Pay My Mom to Babysit? Tax Rules

Grandma watches the kids three days a week. You've been handing her cash—maybe $200 here, $300 there. She insists she doesn't want to be paid, but you insist right back. Everybody's happy.

Until someone mentions taxes.

This is one of the most common household employment scenarios in the country, and the rules are clearer (and more favorable) than you'd expect.

Short Answer: Yes, and It's a Great Idea

Paying your mom (or dad, or any parent) to babysit is completely legitimate. The IRS treats it as household employment—same category as a nanny or babysitter. And in this case, the tax rules actually give you a partial break.

But more importantly, paying your parent on the books creates real financial benefits for both of you. This isn't just about following rules—it's a real financial win for both sides.

Which Taxes Apply (and Which Don't)

The breakdown for paying a parent who's caring for your children in your home:

The key difference from a non-family employee: FUTA is exempt when your parent is caring for your child who is under 18 (or your child of any age who has a physical or mental condition requiring personal care).

That saves you $42/year (0.6% on the first $7,000 of wages). Not a fortune—but every exemption helps.

Why Paying Your Mom Legally Is a Win-Win

This is the part that surprises most families. Going through the hassle of payroll for grandma actually pays off—literally.

She builds Social Security credits

Every dollar in wages with FICA withholding adds to your mom's Social Security earnings record. Social Security benefits are calculated from the 35 highest-earning years. If your mom has gaps in her work history—maybe she was a stay-at-home parent herself, or retired early—these wages directly increase her future monthly benefit.

At $250/week ($13,000/year), your mom earns roughly one full Social Security credit per quarter. After 10 years of credits (40 quarters), she qualifies for benefits on her own record. If she already qualifies, higher recent earnings can replace lower-earning years and bump up her monthly check.

You can claim the Child and Dependent Care Credit

If your parent watches your child under 13 while you (and your spouse, if married) work, the Child and Dependent Care Credit applies. The credit covers 20-35% of up to $3,000 in care expenses for one child or $6,000 for two or more.

That's worth up to $1,050 for one child or $2,100 for two or more children, depending on your income.

But the catch: you can only claim this credit if you report the wages. Under-the-table payments don't qualify. You need a W-2 on file.

She qualifies for unemployment if the arrangement ends

If the kids start school full-time and grandma is no longer needed, she may qualify for unemployment benefits—but only if wages were reported and unemployment taxes were paid. Since FUTA is exempt, this depends on your state's SUTA rules. Some states still cover parent-employees.

Clean records protect everyone

If the IRS ever has questions about the arrangement, documented wages with W-2s and Schedule H filings put you on solid ground. No awkward conversations about "gifts" vs. "compensation."

Real Numbers: Paying Mom $250/Week

Your mom watches your two kids Monday through Wednesday while you work. You pay her $250/week, 50 weeks a year. Here's the annual tax picture:

Now factor in the Child and Dependent Care Credit. With two children under 13, you can claim up to $6,000 in qualifying expenses at a 20% credit rate (for most incomes). That's $1,200 back on your tax return.

Net result: Your employer taxes cost $956. Your tax credit gives you $1,200 back. You're $244 ahead compared to paying cash under the table. And your mom is building Social Security credits. And you have clean records.

"She Doesn't Want Taxes Taken From Her Pay"

This comes up a lot. Your mom says she doesn't want the hassle—just pay her the full amount, no deductions.

A few things to know:

You still owe your employer share regardless. Even if your mom refuses withholding, you owe 6.2% Social Security and 1.45% Medicare from your own pocket. That's non-negotiable.

Income tax withholding is technically optional. If your mom fills out a W-4 claiming enough allowances, her income tax withholding can be $0. She'd owe any income tax when she files her own return, but nothing is withheld from her pay.

FICA withholding is not optional. You're legally required to withhold 7.65% for her share of Social Security and Medicare. If she insists on getting the full gross amount, you can pay her more to cover it—effectively absorbing both shares yourself. But you need to report the correct amounts on the W-2 either way.

The conversation that works: "Mom, I want to do this right. The money coming out of your check goes toward your Social Security—it literally increases your retirement benefit. And I get a tax credit that makes it basically free for me."

What If She Watches the Kids at Her House?

Same rules. The IRS doesn't care where the work happens—what matters is who controls the work. If you're telling your mom when to be available, what the kids need, and paying her directly, she's your employee whether the kids are at your house or hers.

The one exception: if your mom runs an actual daycare business out of her home and watches other children too, she might be self-employed for that work. But the wages you pay her for your kids are still household employment.

What About Your Dad?

Everything in this guide applies equally to your father. The IRS uses "parent" in the rules—mother or father, biological or adoptive. Stepparents qualify too.

The FUTA exemption specifically applies to services performed by a parent in the employ of their son or daughter, caring for the son's or daughter's child under 18. Gender doesn't matter.

The Threshold Still Applies

All of this only kicks in if you pay your parent $3,000 or more in 2026. Below that threshold, no employment taxes are required.

At $250/week, you'll cross the threshold in about 12 weeks—so if your parent provides regular care, you'll almost certainly need to handle taxes.

Use our calculator to run the numbers for your specific arrangement.

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Setting Things Up

If you've decided to pay your parent properly, the quick version:

1. Get an EIN — Free, 5 minutes. Full guide.
2. Have your parent fill out a W-4 — For income tax withholding preferences.
3. Start withholding from each payment — 7.65% for their FICA share.
4. Set aside your employer share — 7.65% from your own pocket.
5. File quarterly or adjust your W-4 — Don't let it pile up until April.
6. Issue a W-2 by January 31 — W-2 guide.
7. File Schedule H — Schedule H guide.

NannyKeeper handles all of this for $10/month. When you add your parent as an employee and identify the family relationship, we automatically apply the FUTA exemption and calculate everything correctly. See our family member tax guide for the full picture on all family relationships.

FAQ

Can I pay my in-laws and get the same exemptions?

No. In-laws are not covered by the family employment tax exemptions. If you pay your mother-in-law or father-in-law, they're treated as a standard household employee—Social Security, Medicare, FUTA, and income tax all apply at normal rates. See our family employee exemptions guide for the complete breakdown.

What if I pay my mom less than $3,000/year?

Below the threshold, you don't owe employment taxes. No EIN needed, no withholding, no W-2, no Schedule H. Your mom may still need to report the income on her own tax return, but that's on her end. You also can't claim the Child and Dependent Care Credit on payments below the threshold unless you file a Schedule H voluntarily.

Does my mom need to file a tax return for this income?

If her total income (from all sources, including what you pay her) exceeds the filing threshold—$16,100 for a single filer in 2026 (higher if she's 65 or older)—she needs to file. Even below that threshold, filing may be worthwhile to get a refund of any over-withheld income tax.

What if I also pay my mom to clean the house—not just watch the kids?

All wages for household work count together toward the threshold. But only the childcare portion qualifies for the Child and Dependent Care Credit. If your mom spends half her time on childcare and half on housekeeping, you can only claim the childcare portion. Keep a rough log of how her time breaks down.