New Nanny Tax Rules for 2026: What Changed

Every year, the IRS adjusts tax thresholds and wage bases for inflation. Here's what changed for household employers in 2026.

New to nanny taxes? Start with our nanny taxes overview for the fundamentals before diving into the 2026 changes.

The $3,000 Threshold

The most important number for household employers is the annual threshold that triggers tax obligations.

What this means: You don't owe Social Security or Medicare taxes until you pay a single household employee $3,000 or more in 2026.

This is per employee, per year. If you pay three different babysitters $2,500 each, you don't owe taxes on any of them.

Social Security Wage Base

The Social Security wage base—the maximum earnings subject to Social Security tax—increased:

What this means: You pay Social Security tax (6.2%) on the first $184,500 of wages. Earnings above that aren't subject to Social Security tax.

For most household employers, this doesn't matter—your nanny probably doesn't earn $184,500. But if you have a highly compensated employee or multiple employees, it could affect your calculations.

Medicare Tax (No Change)

Medicare tax remains:

• 1.45% on all wages (no cap)
• Additional 0.9% on wages over $200,000 (employee only)

There's no wage base limit for Medicare—it applies to every dollar.

FUTA Wage Base (No Change)

Federal Unemployment Tax (FUTA) wage base remains $7,000.

• You pay 6.0% FUTA on the first $7,000 per employee
• Most employers get a 5.4% credit for state unemployment taxes paid
• Effective rate: 0.6% (about $42 per employee)

State Changes for 2026

Several states also updated their requirements:

Minimum Wage Increases

Check your state's current minimum wage →

State Unemployment Changes

State unemployment (SUTA) rates and wage bases vary. Some notable changes:

• California: New employer rate remains 3.4%
• New York: Wage base increased to $12,500
• Texas: Wage base remains $9,000

New: "No Tax on Overtime" Deduction (OBBBA)

The One Big Beautiful Bill Act (signed July 2025) created a new federal income tax deduction for overtime pay, effective for tax years 2025-2028.

What it does: Your nanny can deduct up to $12,500/year in qualified overtime compensation from their federal income tax. It's the premium portion — the "half" of time-and-a-half.

What it doesn't do: It doesn't change your employer tax obligations. FICA, FUTA, and SUTA still apply to all overtime wages.

What you need to do:

• 2025 W-2s: Provide a separate written statement showing qualified overtime (or use Box 14)
• 2026 W-2s and beyond: Report qualified overtime in Box 12 using code TT

Who qualifies: Non-live-in nannies who work more than 40 hours/week. Live-in domestic workers don't qualify because they're exempt from FLSA overtime.

Read our full guide to the overtime deduction →

What Didn't Change

Some things stay the same in 2026:

• Medicare rate: Still 1.45% each (employer and employee)
• FUTA rate: Still 6.0% (0.6% after state credit)
• Quarterly deadlines: Still April 15, June 15, September 15, January 15
• W-2 deadline: Still January 31
• Schedule H requirement: Still filed with Form 1040

Impact on Your Taxes

For most families, the 2026 changes are minor. Let's compare:

Example: $45,000 in annual wages

Unless you're paying over $176,100, your tax amounts are essentially unchanged.

Action Items for 2026

If you're already doing payroll correctly:

• Update any manual calculations with the new $3,000 threshold
• Continue tracking wages against the threshold
• No other changes needed

If you're approaching the threshold:

• The new $3,000 threshold gives you slightly more room than 2025's $2,800
• Track payments carefully from January 1
• Once you cross $3,000, start withholding

If you're starting fresh in 2026:

• Get an EIN if you don't have one
• Sign up for a payroll service
• Start tracking from day one

NannyKeeper Is Updated

NannyKeeper automatically uses the correct 2026 rates and thresholds. You don't need to do anything—our calculations are current.

We also updated:

• Tax calculators
• W-2 generation
• Quarterly estimates
• State-specific calculations

Start your 2026 payroll →

Looking Ahead

The IRS typically announces next year's adjustments in the fall. We'll update this guide when 2027 numbers are released.

For now, you're set with everything you need to handle nanny taxes in 2026.