There are actually two costs to budget for when it comes to nanny payroll: the taxes you owe as an employer, and the service fee for software that handles the math. Both are smaller than most families expect.
Let's break it down.
The employer taxes you'll owe
For a nonexempt worker, Social Security and Medicare generally apply once you pay that worker $3,000 or more in a calendar year (the 2026 threshold). Below that, FICA generally does not apply to that worker; FUTA uses a separate $1,000 aggregate-household-wages test per quarter, and state rules can apply sooner.
Once you cross it, you pay:
| Tax | Rate | Notes |
|---|---|---|
| Social Security (employer) | 6.2% | On all wages up to $184,500 |
| Medicare (employer) | 1.45% | No wage cap |
| FICA total | 7.65% | Your share; employee pays another 7.65% |
| Federal Unemployment (FUTA) | 0.6% | On first $7,000 only, max $42/year |
| State Unemployment (SUTA) | 1–5% | Varies by state, typically on first $7,000–$42,000 |
For most families, the real number to remember is 7.65% on top of wages, plus a nominal FUTA amount. State unemployment varies but is usually a few hundred dollars per year at most.
What does that look like with real wages?
Say you pay your nanny $20/hour, 30 hours a week, year-round ($31,200/year):
| Tax | Calculation | Your cost |
|---|---|---|
| Social Security | 6.2% × $31,200 | $1,934 |
| Medicare | 1.45% × $31,200 | $452 |
| FUTA | 0.6% × $7,000 | $42 |
| SUTA (avg. 2.5%) | 2.5% × $7,000 | $175 |
| Total employer taxes | $2,603/year |
That's about 8.3% above wages, or roughly $217/month on top of your nanny's paycheck. Use our nanny tax calculator to get your exact number based on your state and pay rate.
Estimate your nanny taxes
See what you'll owe in your state — takes about 30 seconds.
What payroll services charge
The service fee is separate from the taxes. It's what you pay for software that calculates everything, generates your W-2 and Schedule H, and tells you what to pay and when.
| Service | Monthly | Annual | Files for you? | Direct deposit |
|---|---|---|---|---|
| NannyKeeper | $10–$18 | $100–$180 | No (you file with guidance) | $6–$8/transfer |
| Poppins | $49 | $588 | Yes | Included |
| SurePayroll | $39 | $468 | Yes | Included |
| GTM Payroll | $70 | $840 | Yes | Included |
| HomePay | $75 (Plus) | $900 | Yes | Included |
| DIY | $0 | $0 | No | N/A |
SurePayroll prices are its Nanny & Household plan, one employee included.
The big split is full-service vs. self-service. Full-service means the company files your quarterly and year-end forms directly with the IRS and your state. Self-service means you get all the calculations, generated forms, and deadline reminders, then spend about 15 minutes per quarter actually submitting them yourself.
Worth remembering either way: household taxes are reported on your own 1040 (Schedule H, under your Social Security number), so the legal responsibility stays with you no matter who files. Full-service also runs on a power of attorney you grant the provider over your federal and state tax accounts so it can file as your agent. It buys convenience, not a transfer of liability, and its accuracy guarantees cover a penalty only when the provider was at fault, never the tax itself.
Self-service is plenty for most families. The math is the hard part. Clicking "submit" on an IRS payment portal is not.
For a deeper look at how all seven services stack up on features, see our full nanny payroll service comparison.
The hidden cost of DIY
Skipping a payroll service entirely is free upfront. But there are real costs hiding inside that $0 price tag.
Penalty for a late or missing 2026 W-2: $60 per form if corrected within 30 days, $130 by August 1, and $340 after August 1 or if not filed. Intentional disregard is at least $690 per form with no annual cap.
Underpayment penalty: The IRS charges interest on taxes you paid late or underpaid. The standard rate is 7% annually in Q4 2026 and resets quarterly, so check the rate for the period you missed.
Your time: Doing nanny payroll correctly from scratch (tracking wages, calculating taxes across federal and state, making quarterly payments, generating the W-2, and filing Schedule H) takes 2–4 hours per quarter if you're careful. That's 8–16 hours per year.
At $10/month, a payroll service costs less than one hour of your time per quarter. And you won't accidentally trigger an IRS notice because of a math error.
What $10/month actually gets you
NannyKeeper's Starter plan is $10/month ($100/year on annual billing). No upsells, no year-end fee. You get:
- Automatic tax calculations for all 50 states
- Pay stub generation for every paycheck
- Quarterly tax calculations with exact amounts to pay
- Email reminders before every quarterly deadline
- W-2 generation in January
- Schedule H preparation for your tax return
- Time tracking for your nanny
You file the forms, but we generate them and tell you exactly what to do. It's closer to "guided self-service" than pure DIY.
Direct deposit is included on Starter as well, at $8 per transfer plus 0.8% on amounts over $1,000 per transfer. The Plus plan ($18/month) lowers that fee to $6 per transfer and supports up to 5 employees. See the full pricing breakdown.
When free is enough
Under $3,000 for one worker in a calendar year, Social Security and Medicare generally do not apply to that worker. FUTA is separate and can apply once combined household-employee wages reach $1,000 in any calendar quarter; state unemployment rules may trigger sooner.
NannyKeeper has a Free Forever tier that tracks payments and shows you where you stand against the threshold. If you're a part-time arrangement (maybe a few hours a week, school pickups, summer care only), free tracking may be all you need. You'll see exactly when you're approaching $3,000 so you can plan accordingly.
Read more about what it costs to hire a nanny legally, including how the taxes stack up against daycare and nanny-share arrangements.
FAQ
Is nanny payroll tax deductible?
No. Employer payroll taxes aren't deductible for most families. But two other tax benefits can offset the cost significantly. A Dependent Care FSA lets you contribute up to $7,500 pre-tax for childcare expenses, saving $1,500–$2,500/year depending on your bracket. If you don't have FSA access, the Child and Dependent Care Credit gives you 20–50% back on up to $3,000–$6,000 in childcare costs.
Can I do nanny payroll myself without a service?
Yes. You'd calculate taxes using IRS Publication 926, make quarterly estimated payments to the IRS and your state, generate W-2s via the SSA's Business Services Online portal, and file Schedule H with your 1040. It's doable if you're comfortable with spreadsheets, but the margin for error is real, and penalties for mistakes aren't trivial.
What happens if I don't pay nanny taxes?
The IRS can assess back taxes (typically 3 years), failure-to-file penalties up to 25%, failure-to-pay penalties up to 25%, and interest. Combined, families caught paying under the table often owe $15,000–$20,000 or more. And it frequently comes to light when a nanny files for unemployment and the state investigates. Read more about the risks of paying a nanny under the table.
Which nanny payroll service is cheapest?
NannyKeeper is the most affordable option at $10/month ($100/year on annual billing) with all core features included: tax calculations, W-2, Schedule H, deadline reminders. Full-service options, which file for you, start at $39/month for one nanny (SurePayroll, $468/year). HomePay's comparable Plus tier is $900/year ($75/mo); an Essentials tier exists at $708/year ($59/mo). See the full comparison →.
Ready to simplify nanny taxes?
NannyKeeper does the calculations, tracks the deadlines, and prepares the paperwork so you can focus on your family.