How Much Does Nanny Payroll Cost in 2026?

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

You owe employer taxes once you pay any single employee $3,000 or more in a calendar year (the 2026 threshold). Below that, nothing is required.

Once you cross it, you pay:

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):

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.

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.

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.

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 eight 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 W-2: $50 per form, up to $630,500/year (for willful disregard). For a single family that forgets, it's typically $50–$100 per incident.

Underpayment penalty: The IRS charges interest (currently ~7% annually) on taxes you paid late or underpaid. Miss a quarterly payment and you may owe more than you calculated.

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 ($120/year). 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.

The Plus plan ($18/month) adds direct deposit at $6/transfer and support for up to 5 employees. See the full pricing breakdown.

When free is enough

If you pay your nanny under $3,000 in a calendar year, you don't owe employment taxes at all. No FICA, no FUTA, nothing.

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 20–35% 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 ($120/year) with all core features included—tax calculations, W-2, Schedule H, deadline reminders. The next cheapest full-service option is SurePayroll at $39/month ($468/year). HomePay is the most expensive at ~$1,000/year. See the full comparison →.