Nanny Taxes: Your Complete Guide

Everything parents need to know
in 2025

Finding your ideal nanny is an amazing feeling, and a huge relief. But then comes the nanny taxes overwhelm. If you feel confused by the paperwork and rules, but want to do what’s best for yourself and for your nanny by staying compliant, this primer is for you.

money going into a piggy bank in an guide about nanny taxes for parents

Nannies and babysitters should be paid on the books

All nannies and babysitters are household employees (not independent contractors), and if a family pays a nanny or caregiver over a certain amount in a calendar year or a calendar quarter, there is a tax responsibility for both parties. 

This means that you as the employer need to pay employment taxes, such as Social Security, Medicare taxes, and unemployment taxes, and withhold and pay your caregiver’s income taxes. Your nanny will be a W-2 employee, just like most people employed at other jobs. 

  • Nannies and babysitters are considered employees, not independent contractors, because they are not in charge of what, when, or how their work is done – you are. 

  • Newborn care specialists and other childcare/childbirth related professionals may work as independent contractors (also called 1099, after the form). 

Occasional babysitters may still need to be on payroll 

While it's more common for families to have their full-time nanny on the payroll, some occasional and part-time babysitters also need to be employed as household employees and have taxes taken out of their paycheck. 

If your nanny makes more than $2,800 from you in the year 2025 ($2,700 for 2024), you need to treat them as a household employee and take taxes out of their paycheck. It may sound like a lot of you only use a sitter occasionally, but over the course of a year, even a fill-in sitter who maybe also helps you for a week or two during the summer holidays can hit that threshold pretty easily. 

 
 

Please note, your babysitter still needs to report all of their income when they file their taxes, even if it doesn’t hit the $2,800 mark with you or any one family specifically. If your nanny has questions about their taxes, pass along this updated 2025 guide to taxes, specifically for nannies and babysitters, for helpful info!

 
 

Many parents miss this, due to the occasional or flexible nature of the positions and how they develop and change over time. This is why it’s good to track any payments you’ve made to sitters or nannies over the year. 

  • There are some exceptions, such as a teenager who is still in school and babysitting on the side, or some instances of family members taking care of children.

Nanny taxes: how it works

  1. Get all the paperwork in order upon hire

    • You need Employer Identification Numbers, possibly both federal and state depending on where you live, and potentially state tax ID

    • Get a completed Form I-9 and W-4 form from your nanny

  2. Calculate and track payroll

    • Determine your nanny’s gross income and how much to withhold

  3. File taxes throughout the year

    • In most cases, you’ll file taxes quarterly throughout the year, but some states have different rules

    • Send in estimated payments to the IRS on a quarterly basis

  4. Prepare Year-End Tax Forms

    • Give your nanny their W-2 form by the end of January so they can file their taxes

    • File your own forms necessary (such as W-3 and a copy of the W-2 to the Social Security Administration), and complete a Schedule H with your personal tax return 

Remember that different states have different tax rules, so it’s best to always check local rules before you get started. For Smart Sitting families, we have been long time partners with Homepay, who can take care of your entire nanny tax needs. 

Real talk: do I need to pay my nanny on the books?

Yes, yes, and yes. The main reason for you, perhaps, is that it’s what’s legally required. You can get in a lot of trouble if you do not pay your nanny taxes and then get audited. 

But the other big reason is what it means for your nanny. Being paid on the books means they have documentation over their income. This allows them to:

  • apply for unemployment assistance if, say, a devastating pandemic leaves them without work for a long period

  • accrue Social Security benefits

  • prove income if they ever need to apply for loans or housing. 

Ultimately, being paid as a W-2 employee also elevates the profession. A lot of people can say they babysat as teenagers and watched TV while the kiddos slept. Not as many can say they have a professional childcare career, where they build their skillset and experience to offer something way beyond just making sure kids are alive at the end of the day. As a long-time nanny agency championing the work of nannies, we believe very strongly that the caregivers we work with are professionals. 

  • If you have more questions about nanny taxes, take a look at our Nanny tax FAQs with answers to the most common questions we get about paying nannies right

Still overwhelmed? We’ve got you.

As a nanny ageny with over 15 years under our belt, we know a thing or two about finding, hiring, and working with fantastic nannies and babysitters. We can help you too, with dedicated, tailored assistance based on your needs. Not only can we find you your ideal nanny, we’ll help you draw up job contracts, connect you with tax experts, send you pre-vetted sitters at a moment’s notice for fill-in care or date nights, and advise you if conflicts ever come up or you have questions about being a nanny employer.

If you’re looking for a new childcare professional to join your crew, tell us a bit about your family via the button below and let us help you find the nanny that is just right for you.

Cajsa Landin