Hiring a live-in nanny changes the tax picture more than most families expect. Room and board, overtime rules, and even the new federal overtime deduction all work differently when your nanny lives in your home.
The good news: some of these differences actually save you money. Here's what you need to know.
Room and Board: The Biggest Tax Difference
When your live-in nanny receives free meals and a room in your home, that has real value — but the IRS doesn't count it as taxable wages. This is the single biggest tax advantage of a live-in arrangement.
Under IRS Publication 926 and IRC Section 119, meals and lodging provided to your employee are excluded from wages if:
- The lodging is on your premises (your home counts)
- It's provided for your convenience (you need them available for early mornings, late nights, or overnight care)
- The employee must accept it as a condition of employment (living in is part of the job)
For most live-in nanny arrangements, all three conditions are met.
What this means in practice
| Compensation Type | Taxable? | Subject to FICA? |
|---|---|---|
| Cash wages ($800/week) | Yes | Yes |
| Room provided in your home | No | No |
| Meals provided in your home | No | No |
| Cash given for groceries ($100/week) | Yes | Yes |
| Cash housing stipend ($500/month) | Yes | Yes |
The key distinction: In-kind room and board = not taxable. Cash in lieu of room and board = taxable wages. If you give your nanny $500/month for groceries instead of providing food directly, that $500 is wages subject to Social Security, Medicare, and income tax.
How much does this save?
Let's compare a live-in vs. live-out nanny earning the same total compensation:
| Live-Out | Live-In | |
|---|---|---|
| Cash wages | $52,000/year | $40,000/year |
| Room value | — | ~$12,000/year |
| Total compensation | $52,000 | $52,000 |
| Employer FICA (7.65%) | $3,978 | $3,060 |
| FICA savings | — | $918/year |
Both nannies receive $52,000 in total compensation, but the live-in arrangement saves you nearly $1,000/year in employer taxes — because room and board aren't subject to FICA.
Plug in your own numbers to see the exact savings:
Overtime Rules: The Federal Exemption
Here's where live-in nanny rules diverge sharply from live-out.
Federal law does not require overtime for live-in domestic employees. Under the Fair Labor Standards Act (Section 213(b)(21)), domestic workers who reside in the employer's household are exempt from the overtime requirement.
This means:
- Live-out nanny working 50 hours/week: Must receive 1.5x pay for the 10 overtime hours
- Live-in nanny working 50 hours/week: Can be paid straight time for all 50 hours (under federal law)
Important: The minimum wage still applies. Your live-in nanny must earn at least $7.25/hour (or your state's higher rate) for all hours worked — overtime exemption doesn't mean you can pay below minimum wage.
Who counts as "live-in"?
The DOL recognizes two categories:
| Category | Requirement |
|---|---|
| Permanent resident | Lives and sleeps on premises 7 days/week with no other home |
| Extended stay | Resides on premises 5+ days/week (120+ hours) or 5 consecutive days/nights |
A nanny who works Monday through Friday and goes home on weekends may or may not qualify, depending on the total hours at your residence.
9 States That Still Require Overtime for Live-In Nannies
Even though federal law doesn't require it, these states have their own rules:
| State | Overtime Kicks In | Notes |
|---|---|---|
| California | After 9 hrs/day or 45 hrs/week | Domestic Worker Bill of Rights (AB 241). Double time after certain thresholds. |
| Hawaii | After 40 hrs/week | Standard overtime applies to live-in domestics |
| Maryland | After 40 hrs/week | No live-in exemption |
| Massachusetts | After 40 hrs/week | For 24+ hour shifts, up to 8 hrs of sleep/meals can be excluded by written agreement |
| Minnesota | After 48 hrs/week | Higher threshold than the standard 40 hours |
| Nevada | After 40 hrs/week | Overtime required unless a written opt-out agreement exists |
| New Jersey | After 40 hrs/week | No live-in exemption |
| New York | After 44 hrs/week | Domestic Workers' Bill of Rights. Also requires 1 day of rest per 7 days. |
| Oregon | After 44 hrs/week | Higher threshold than standard |
If you're in one of these states, you must follow the state overtime rules even though federal law doesn't require it for live-in employees. Check your state's full requirements →
The Overtime Deduction Doesn't Apply to Live-In Nannies
The "no tax on overtime" rule from the One Big Beautiful Bill Act lets employees deduct the premium portion of overtime pay from their federal income tax (up to $12,500/year, through 2028).
Live-in nannies don't qualify. The IRS is clear: the deduction only applies to overtime that's required under the FLSA. Since live-in domestic employees are FLSA-exempt from overtime, their overtime pay — even if voluntarily paid or required by state law — doesn't count as "qualified overtime compensation."
| Situation | Qualifies for Deduction? |
|---|---|
| Live-out nanny works 45 hrs/week | Yes — overtime premium on the 5 extra hours qualifies |
| Live-in nanny works 50 hrs/week, paid straight time | No — FLSA-exempt, no overtime to deduct |
| Live-in nanny in New York, paid overtime after 44 hrs | No — state-mandated overtime doesn't qualify for the federal deduction |
| Live-in nanny voluntarily paid time-and-a-half | No — voluntary overtime pay doesn't qualify |
For a full breakdown of the overtime deduction, see our no tax on overtime guide.
Tracking Hours for a Live-In Nanny
Hours tracking is more complex for live-in nannies because they're physically present all the time. The DOL requires a written agreement between you and your nanny that documents:
- Sleep time: Up to 8 hours per night can be excluded from compensable hours, provided adequate sleeping facilities are available
- Meal periods: Bona fide meal breaks where the nanny is completely relieved of duties can be excluded
- Off-duty time: Time when the nanny is free to leave or pursue personal activities can be excluded
The fine print
- If sleep is interrupted by calls to duty, those interruptions count as hours worked
- If the nanny doesn't get at least 5 hours of uninterrupted sleep, no sleep time can be excluded
- If actual hours consistently differ from the written agreement, a new agreement is needed
Example: Your live-in nanny is on duty from 7am to 7pm (12 hours), with a 1-hour lunch break. The written agreement excludes 8 hours of sleep time (10pm–6am) and the lunch break. Compensable hours: 11 per day.
FICA and FUTA: Same Rules, Different Math
Social Security, Medicare, and federal unemployment taxes work the same way for live-in and live-out nannies — with one practical difference:
Only cash wages count. The value of room and board provided in-kind is not subject to FICA or FUTA. This means:
| Tax | Rate | Applied To |
|---|---|---|
| Social Security (employer) | 6.2% | Cash wages up to $184,500 |
| Medicare (employer) | 1.45% | All cash wages |
| FUTA | 0.6% | First $7,000 of cash wages |
| Social Security (employee) | 6.2% | Cash wages up to $184,500 |
| Medicare (employee) | 1.45% | All cash wages |
The household employee threshold is $3,000 in cash wages for 2026. Room and board don't count toward this threshold.
W-2 and Schedule H: No Differences
Year-end reporting is identical for live-in and live-out nannies:
- W-2 due January 31 — Report only cash wages and taxes withheld (room and board excluded)
- Schedule H filed with your 1040 — Same form, same process
- Quarterly tax payments — Same deadlines
The W-2 will look simpler for a live-in nanny because the wages reported are lower (cash only), even though total compensation including room and board may be substantial.
See our W-2 guide and Schedule H guide for step-by-step instructions.
Live-In vs. Live-Out: Side-by-Side Comparison
| Live-In | Live-Out | |
|---|---|---|
| Room and board taxable? | No (in-kind) | N/A |
| Cash in lieu of room/board? | Yes (taxable) | N/A |
| Federal overtime required? | No (FLSA exempt) | Yes (after 40 hrs/week) |
| State overtime? | 9 states still require it | All states follow FLSA minimum |
| OBBBA overtime deduction? | No | Yes (if eligible) |
| FICA applies to? | Cash wages only | All wages |
| FUTA applies to? | Cash wages only | All wages |
| W-2 reporting | Cash wages only | All wages |
| Hours tracking | Written agreement required for sleep/meal/off-duty exclusions | Standard timekeeping |
| Minimum wage | Applies to all hours worked | Applies to all hours worked |
FAQ
Does my live-in nanny's room and board count as wages?
No — as long as the room and meals are provided in your home, for your convenience, and as a condition of employment. These three conditions are met for most live-in nanny arrangements. Only cash given in place of room and board counts as wages.
Do I have to pay my live-in nanny overtime?
Under federal law, no. Live-in domestic employees are exempt from overtime under the FLSA. However, 9 states (California, Hawaii, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, and Oregon) require overtime for live-in nannies at varying thresholds. Check your state's requirements.
Can my live-in nanny get the "no tax on overtime" deduction?
No. The OBBBA overtime deduction only applies to overtime required by the FLSA. Since live-in nannies are FLSA-exempt, their overtime pay doesn't qualify — even if your state requires you to pay it. See our full guide to the overtime deduction.
How do I track hours for a live-in nanny?
Create a written agreement with your nanny that specifies work hours, sleep time (up to 8 hours can be excluded if uninterrupted), meal breaks, and off-duty periods. Track actual hours worked and update the agreement if reality consistently differs. The DOL requires this documentation.
Do I still need an EIN and W-2 for a live-in nanny?
Yes. The reporting and filing requirements are identical to a live-out arrangement. You need an EIN, must issue a W-2 by January 31, and file Schedule H with your tax return. The only difference is that the W-2 reports cash wages only — room and board are excluded.
What if I provide both room and a cash stipend?
The room itself is not taxable. The cash stipend is taxable wages. If you provide a room (not taxable) plus $200/week for groceries (taxable), only the $200/week counts toward wages, FICA, and the employment threshold.
See what you'll owe
Use our free calculator to estimate your nanny tax costs for 2026.