You're about to have a baby — congratulations. Your brain is running through a hundred logistics, and somewhere on the list is what to do about your nanny situation while you're on maternity leave.
Your obligations as a household employer don't pause just because you're home with a newborn. But the specifics depend on what you're planning to do with your nanny's role.
Scenario 1: You Keep Your Nanny While on Leave
Your employer obligations continue in full — whether you're on paid leave, unpaid leave, or recovering at home. Payroll keeps running as normal.
This is the most common scenario and the simplest from a tax standpoint. Your nanny keeps working, you keep running payroll, taxes keep getting withheld.
What does often change is your nanny's role. Maybe they're watching your toddler while you handle the newborn. Maybe they're pitching in with the baby too, or covering more hours while you recover.
Adjusting hours and pay
If your nanny's hours change, run payroll based on the actual hours worked. There's nothing special about the tax treatment — just adjust the amount and withhold as usual.
| Change | What to Do |
|---|---|
| Hours increase (nanny covers more) | Run payroll on increased hours, same hourly rate |
| Hours decrease (you need less help) | Run payroll on reduced hours — discuss the change with your nanny first |
| Role shifts (toddler care → newborn help) | No tax impact, but update your nanny contract if duties change significantly |
| No change | Business as usual |
The dependent care credit still applies
A lot of parents assume they lose the Child and Dependent Care Credit while they're home on leave. Not true.
The IRS considers you "gainfully employed" during a temporary absence from work, and maternity leave qualifies. Per IRS Publication 503, you're treated as having earned income when you're temporarily absent due to illness, education, or vacation, as long as you return to work afterward.
The same logic applies to a Dependent Care FSA. If your employer offers one and you've been contributing, those funds remain valid for childcare expenses during your leave.
The key requirements:
- You must have earned income (paid leave counts, and even unpaid leave counts if you return to work within a reasonable time)
- If married, your spouse must also be working or looking for work
- Your child must be under 13
- You must be paying your nanny legally — which you are, since you're running payroll
Read our full breakdown of the credit vs. FSA for the numbers.
Scenario 2: You Temporarily Reduce or Pause Hours
Maybe you want your nanny to take a break while you're home — a few weeks, maybe a couple of months. The tax implications depend on whether you're reducing hours or stopping them entirely.
Reducing hours
If your nanny goes from 40 hours a week to 20, just run payroll on the reduced amount. All the same taxes apply — Social Security, Medicare, federal and state income tax — calculated on the lower wages.
Make sure you and your nanny are on the same page about whether this is temporary. A verbal "we'll figure it out" can create confusion and resentment. Put the dates and expected hours in writing.
Pausing entirely
If your nanny isn't working at all for a period, you don't run payroll. No wages means no tax withholding.
But a few things to be aware of:
- Unemployment eligibility. A temporary layoff — even one with a return date — means your nanny can file for unemployment benefits in most states. The unemployment taxes (FUTA and SUTA) you've been paying exist specifically for this situation.
- Quarterly filing. You still owe quarterly taxes for any quarter in which wages were paid. If your nanny worked in January and February but you paused in March, you still file and pay for Q1.
- Threshold impact. The $3,000 FICA threshold (2026) is based on total annual wages. If you've already crossed it before the pause, you owe employment taxes for the year. If you haven't — and the pause means you won't — taxes may not apply. Use our calculator to check.
| Duration of Pause | What You Need to Do |
|---|---|
| 1–2 weeks | Likely nothing special — treat as unpaid time off |
| 3–6 weeks | Document the arrangement in writing; nanny may file for unemployment |
| 2+ months | This starts to look like a temporary layoff; be transparent about the return date |
Be direct about the timeline
The worst thing you can do here is leave your nanny guessing about whether they still have a job. Something like: "I'm going on leave starting April 1. I'd like you to take six weeks off and come back May 15 at your regular schedule."
Put a temporary amendment in your nanny contract that spells out the pause, the return date, and whether any pay or benefits continue.
Scenario 3: You Let Your Nanny Go
Maybe the math changes after the baby arrives. Maybe one parent decides to stay home. Maybe you're switching to a different childcare arrangement.
If you're ending the employment relationship, you have the same obligations as any employer separation. Our guide on what happens when your nanny leaves covers every step. The highlights:
Final paycheck
Your nanny is owed a final paycheck covering all hours worked through their last day. When it's due depends on your state — some require immediate payment upon termination, others allow until the next regular payday.
| Situation | Timing |
|---|---|
| You terminate the nanny | Some states (CA, CO, MT, OR) require same-day or within 24–72 hours |
| Nanny resigns | Most states: next regular payday |
Run this through payroll like any other pay period. Same tax withholdings, same deductions.
PTO payout
If your nanny has accrued unused vacation or PTO, some states require you to pay it out at separation. California, Illinois, Massachusetts, and Colorado treat accrued vacation as earned wages. Other states defer to whatever your contract or policy says. See our PTO guide for the full state-by-state picture.
Ongoing obligations after separation
- W-2 due by January 31 of the following year, covering all wages paid during the year
- Schedule H filed with your 1040, even if employment only lasted part of the year
- Quarterly taxes owed for every quarter wages were paid
- State unemployment notifications may be required — check your state
Your nanny can file for unemployment benefits after being let go. The FUTA and SUTA taxes you paid throughout employment fund those benefits.
Scenario 4: You Hire a New Nanny After Baby Arrives
A new baby often means new childcare needs, especially if you're hiring help for the first time.
First-time household employer?
If this is your first nanny, you'll need to set up as a household employer. That means getting an EIN, having your nanny fill out a W-4 and I-9, registering with your state, and starting to run payroll once wages hit the $3,000 annual threshold (2026). Our complete nanny tax guide walks through every step.
Replacing an existing nanny?
Handle the departure first (Scenario 3 above), then onboard the new person. Your EIN, state registrations, and quarterly tax schedule all carry over — you don't need to start from scratch.
For the new hire, you'll need:
- Completed W-4 and I-9
- A new nanny contract reflecting the updated role
- Direct deposit info if applicable
The threshold is per employee
The $3,000 FICA threshold applies per employee, not in aggregate. If you paid your departing nanny $2,000 and your new nanny $2,000, neither has crossed the threshold, even though you paid $4,000 total in household wages.
FUTA works differently — the $1,000/quarter threshold is aggregate across all employees.
Hiring a postpartum doula or night nurse?
If you're bringing on short-term help specifically for the newborn period, the tax rules still apply. A postpartum doula or night nurse working in your home is typically a household employee. Read our guides on postpartum doula taxes and night nurse taxes for the specifics.
Planning Ahead
Have the conversation with your nanny early. The more notice, the better it goes for everyone.
Before your leave starts
- Discuss the plan. Will their hours change? Will they take time off? Is there an end date? Your nanny is planning their own finances around this information.
- Put it in writing. A quick contract amendment or even a signed letter is enough. Include dates, expected hours, and any changes to duties or pay.
- Check accrued PTO. If your nanny has unused PTO, decide whether they'll use it during the transition or save it.
- Run payroll ahead if needed. If you're having a scheduled C-section or induction, batch anything you can before your due date.
During your leave
- Keep running payroll on time. Taxes don't take parental leave. If you use NannyKeeper, payroll takes about two minutes, even in the postpartum fog.
- Track hours accurately. If your nanny's schedule is shifting week to week, use a time tracking tool so there's no ambiguity come payday.
After your leave
- Reassess the arrangement. Your childcare needs at six weeks postpartum will probably look different from what you planned at 36 weeks pregnant. That's normal — just document any permanent changes.
- Update your contract. If duties, hours, or pay changed during leave and the changes are sticking, update the nanny contract to reflect reality.
FAQ
Does maternity leave disqualify me from the dependent care credit?
No. The IRS treats temporary absences from work — including maternity leave — as periods of gainful employment, provided you return to work afterward. Paid leave, unpaid FMLA leave, and short-term disability all qualify. Your Dependent Care FSA contributions remain valid too.
Can my nanny collect unemployment if I pause their work during my leave?
In most states, yes. A temporary layoff — even with a planned return date — makes your nanny eligible to file. The unemployment benefits are funded by the FUTA and SUTA taxes you've already been paying. Your nanny should file in the state where they work, not where they live (if those differ).
Do I still owe quarterly taxes during my leave?
You owe quarterly taxes for any quarter in which wages were paid. If your nanny worked in January and you went on leave in February with no further wages, you still owe Q1 taxes by April 15. If no wages are paid in an entire quarter, there's nothing to file for that quarter.
What if I hire a temporary nanny just for the newborn period?
The same household employer rules apply. If you pay them $3,000 or more in 2026, you owe FICA taxes on all their wages. The threshold is per employee, so a temp nanny who earns $2,500 stays under the threshold even if your regular nanny crossed it. Use our calculator to estimate the tax impact.
Should I update my nanny contract before going on leave?
If anything is changing — hours, duties, schedule, or a temporary pause — yes. A written amendment protects both of you. It doesn't need to be formal. A signed document stating the temporary changes, effective dates, and what happens when leave ends is enough. Our contract builder can help, or see our guide on nanny contract essentials.
Want the full tax picture? Our complete nanny tax guide covers every federal and state obligation.
Ending employment? See what to do when your nanny leaves for final paycheck rules, W-2s, and unemployment.
Wondering about tax savings? The dependent care credit and FSA guide shows how to offset the cost of paying legally.
Need to sort out PTO? Our nanny PTO guide breaks down vacation, sick days, and payout rules by state.