Worked example · updated 2026-08-01

Hiring a nanny at $25 an hour

The wage is one number; the household's all-in cost is another. What employer-side Social Security, Medicare and FUTA add to a full-time nanny's pay, and what the nanny actually takes home.

Illustrative worked example. The household is hypothetical; every figure is computed by the same verified engines and rule packs the calculators use.

The situation

A hypothetical household hires a nanny at $25 an hour, 40 hours a week, for 50 weeks a year, and withholds the employee's share of Social Security and Medicare from pay as most employers do. The family sets the schedule and directs the work, so the nanny is a household employee rather than an independent contractor.

What goes in

Hourly rate: $25
Hours per week: 40
Weeks per year: 50
Employee share withheld: Yes

What comes out

Employer’s all-in annual cost

$53,867

Cash wages: $50,000
Employer Social Security6.2%: $3,100
Employer Medicare1.45%: $725
Federal unemployment (FUTA)on the first $7,000: $42
Employee take-home before income tax: $46,175
Gap between cost and take-home: $7,692

Verified 2026-07-31 against Publication 926 (2026), Household Employer's Tax Guide (effective 2026-01-01)

The control test decides employment, not the hours

Because the family sets the schedule and directs how the work is done, the IRS common-law test treats the nanny as an employee. That is true of part-time arrangements too — hours affect which thresholds are crossed, not whether the relationship is employment.

Two thresholds, triggering two different taxes

Cash wages above the annual Publication 926 threshold bring Social Security and Medicare into play, charged at the same rates to each side. Federal unemployment tax has a separate quarterly trigger and applies only to a capped slice of wages, which is why it stays a small line on a full-time salary no matter how high the wage goes.

The employer's cost is the wage plus its own share

The household pays its half of Social Security and Medicare on top of wages, plus FUTA. That is the budget figure, and it is several thousand dollars above the hourly rate multiplied out. State unemployment tax and, in many states, workers' compensation insurance sit on top of even that.

Take-home is lower than the wage for a different reason

The employee's own half comes out of pay. Income-tax withholding is optional for household employees unless both parties agree to it, so the take-home figure here is before any income tax the nanny will owe on their own return.

What this example is good for

The gap between what the household spends and what the nanny receives is the tax that household employment creates on both sides. Paying it properly builds the employee's Social Security record and unemployment eligibility — the two things paying off the books quietly removes.

Run this with your own numbers — Nanny Tax

Estimate the household-employer taxes on wages paid to a nanny, caregiver, or housekeeper: Social Security and Medicare once cash wages reach $3,000 for 2026, federal unemployment tax on the first $7,000, your all-in cost as the employer, and your employee’s take-home pay.

Calculators behind this example

Nanny Tax

Nanny Tax Quiz

A short screener that walks the Publication 926 tests in order: whether the worker is your employee rather than self-employed, whether a family exemption applies, and whether expected cash wages cross the 2026 threshold. It gives a fact-framed estimate with the rule behind each answer.

Estimate only — not legal, tax, or financial advice. Only IRS can determine your actual amounts.

Official source: IRS Publication 926 — Household Employer’s Tax Guide ↗

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🏠Hiring a nanny at $25 an hour