Getting paid legally as a nanny
By the NannyKeeper Team · Updated
If a family hires you to care for their kids in their home, the IRS calls them a household employer. Here's what that means for your paycheck, your taxes, and the benefits you quietly earn just by getting paid the right way.
From the team that builds NannyKeeper, the payroll service household employers use to file W-2s and Schedule H every year.
Am I really a “household employee”?
Yes — almost certainly, if you nanny in someone's home on their schedule. The label isn't a technicality; it's the difference between a paycheck the IRS recognizes and one it doesn't. And it isn't a judgment call. The IRS writes the test in plain language.
“You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done.”
A nanny who shows up at the family's house, follows the family's routine, uses the family's car seat, and is told when to put the kids down — that's an employee. Doesn't matter if the family calls you a “contractor” or hands you cash. The IRS doesn't care about the label; it cares about the facts.
Why W-2, not 1099
Once you're an employee, the family is supposed to put you on a W-2. A 1099 is for genuinely independent contractors — the plumber, the lawn service, the photographer — people who set their own schedule and bring their own tools. A nanny doesn't fit that test, even if the family signs a contract calling you one.
The reason this matters for you, not just for the family: a W-2 is what makes you eligible for unemployment if the relationship ends, what earns you Social Security credits toward retirement, and what landlords and lenders want to see when you apply for an apartment or a car loan. A 1099 sticks you with both halves of FICA — 15.3% instead of 7.65% — and often a surprise tax bill in April.
A family that tries to 1099 you is misclassifying. The IRS treats that as a labor violation by the family, not by you.
Most families who suggest 1099 aren't trying to cheat anyone — household employer rules are genuinely confusing. If a family proposes it, send them our explainer on why nannies are W-2 employees, not 1099 contractors and the conversation usually fixes itself.
Overtime: federal law has your back
Past W-2 paperwork, the Fair Labor Standards Act guarantees you minimum wage and overtime pay. The Department of Labor says this plainly:
“Also, domestic service workers (such as housekeepers, full-time babysitters, and cooks) are normally covered by the law.”
What that means in practice: if you live out, the family must pay you time-and-a-halffor every hour past 40 in a workweek. Live-in nannies are exempt from federal overtime (DOL Fact Sheet #79B), though several states — California, New York, Maryland, and Massachusetts among them — require overtime anyway. If your weekly hours run over 40, check your state's rules and put the overtime rate in writing before you start.
What the family pays on top of your wage
For every dollar of your gross pay, the family pays roughly an extra 8–10 cents in employer taxes. That's their obligation — not deducted from your check, not negotiable. Your wage is quoted gross, before anything comes out.
The breakdown looks like this:
- Social Security (employer half)
- 6.2%
- Medicare (employer half)
- 1.45%
- Federal unemployment (FUTA)
- 0.6% on first $7,000
- State unemployment (SUTA)
- varies by state
That total — usually 8–10% on top of your wage — is the family's cost of doing payroll legally. When a family proposes “$20 cash or $18 on the books,” what they're really saying is “I'll keep the 8–10% employer cost if you take the risk.” The savings come out of your pocket: no Social Security credit, no unemployment if you're let go, no provable income for your next lease. (Want to see the math from the family's side? Our free nanny tax calculator breaks it down by state.)
What gets withheld from your paycheck
Withholding isn't extra tax. It's the same income tax you'd owe on April 15th, just paid in small weekly chunks so you don't owe a surprise bill at the end of the year. Four things come out:
Federal income tax — based on the W-4 you fill out on day one. Filing status, dependents, and other income all matter. Your half of Social Security and Medicare (FICA) — 7.65% of every dollar, withheld by the family and sent to the IRS on your behalf. State income tax— varies. Nine states (including Texas, Florida, and Washington) don't have one. State disability or paid family leave — applies in California, New York, New Jersey, Rhode Island, and Hawaii, usually as a small percentage of pay.
Expect roughly 75–85% of your gross to land in your bank account, depending on your state and W-4.
What a W-2 quietly buys you
The taxes withheld aren't lost money. They buy you four things that pure cash work doesn't.
Social Security credits. Every quarter of on-the-books earnings above the credit threshold earns you a credit toward retirement, disability, and survivor benefits. The SSA puts a specific number on it:
“In 2026, you earn one Social Security and Medicare credit for every $1,890 in covered earnings each year. You must earn $7,560 to get the maximum four credits for the year. You must earn at least 40 Social Security credits to be eligible for Social Security benefits.”
Provable income.A W-2, or pay stubs leading to one, is what apartment leases, car loans, and mortgages ask for. Cash-pay nannies routinely get rejected on applications — not because of bias, but because there's nothing to verify.
Unemployment if you're let go.The family is paying state unemployment tax on every dollar of your wages. If you're laid off or the family moves, you can file a claim like any other W-2 worker. Cash-paid nannies can't.
A clean tax return. Your W-2 income, federal withholding, and FICA are reported to the IRS in January. April becomes a non-event — you just file like everyone else.
If the family wants to pay you in cash
Some families propose “off the books” cash because they think it's simpler or cheaper. It often is — for them. For you, it quietly takes away the four things above. The cheapest move long-term is to bring it up early, before you start.
Most families have just never thought through household payroll and aren't trying to cheat anyone. A family that's a good fit will be glad you brought it up; paying legally protects them too, and most don't realize that.
“I want to be a long-term fit for you all, and the cleanest way to do that is W-2 paychecks so we both stay on the right side of IRS rules. There are services that handle the math automatically for around $10–18 a month — want me to send you a link?”
Then send them our guide to paying a nanny legally. Most families say yes once they see how little setup actually involves. (For the deeper context on household employer rules, our 2026 nanny tax guide walks through every form and deadline.)
Before your first paycheck
Four things to confirm with the family before payroll starts. Clear answers mean the family has thought it through; vague answers are worth a follow-up conversation.
Will I get a W-2 at year-end? Right answer: yes. What's my hourly rate before taxes? Push for a gross number — “$25/hr take-home” is hard to convert because every state withholds differently. Will overtime be paid at time-and-a-half? Federal law requires it for live-out nannies past 40 hours a week; a few states (CA, NY, MA, MD) layer on additional daily-overtime or live-in rules. Direct deposit or check?Direct deposit hits your account on payday; checks can take days to clear. Just say which you'd prefer.
Got a different question? Our FAQ covers another ~40 of the most common ones from both nannies and families.
This guide is educational, not legal or tax advice. For situation-specific questions, consult a CPA or employment attorney in your state. Sources cited inline; quotes are verbatim from the linked IRS and SSA pages.
Related resources
Free nanny tax calculator
See what the family pays in employer taxes and what your take-home looks like, by state.
Where to find nanny jobs in 2026
The four channels working nannies actually use, plus scripts for word of mouth and parent groups.
Build a nanny profile that families trust
Verified payroll history, no awkward reference calls. The seven things that move a family from "interested" to "hired."
How to pay a nanny legally (for families)
Send this to a family that wants to do payroll right but doesn't know where to start.
Why a nanny is a W-2 employee, not a 1099 contractor
The IRS test in plain English. Send this if a family pushes for 1099 paperwork.
The complete 2026 nanny tax guide
Every form, deadline, and threshold the family is responsible for — the deep version.
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