When you employ a nanny – a full time nanny or part time nanny – in your home, the IRS considers you a household employer, making you responsible for payroll taxes such as Social Security, Medicare, and unemployment contributions. While this might sound intimidating, it is simply a case of withholding the relevant taxes from your nanny’s paycheck, contributing your employer’s share, and filing a few forms during tax season. Or, as many families choose to do, working with a reputable household employment tax company–ABC is happy to recommend several – who can streamline the process and ensure compliance.
- Do you have to pay tax for a nanny?
- Full time nanny tax rates in Colorado
- How to stay on top of nanny taxes as a household employer
1) What are my tax obligations if I hire a full time nanny?
When you employ someone to care for your children in your home, either on a full time or part time basis, the IRS considers you a household employer. Under the law, your nanny is considered a household employee rather than an independent contractor (W2 vs 1099). The 2026 federal household employer “nanny tax” threshold is $3,000 in wages paid to a single employee in the calendar year.
While nanny taxes may feel like a lot to handle at first, it’s a normal part of household employment. Paying nanny taxes “on the books” ensures your nanny builds a professional credit history and is eligible for future benefits like Social Security and unemployment, while providing your family, the employer, with legal protection from IRS audits and access to valuable childcare tax credits. As a reputable Colorado nanny agency with strong industry connections, we work closely with the top payroll and tax companies in the U.S. who will walk our clients through every step.
2) Full time nanny tax rates in Colorado
When you hire a full time nanny in Colorado, there are a few different payroll deductions and employer contributions to consider. As a general rule, we advise that families budget about 10-12% of their nanny’s wages to cover employer contributions and payroll costs.
a) Social security and Medicare taxes
Together, Social Security and Medicare taxes equal 15.3% of wages. The employer pays 7.65%, and the remaining 7.65% is typically withheld from the nanny’s paycheck.
b) Federal unemployment tax (FUTA)
Household employers must also pay Federal Unemployment Tax, which helps fund unemployment benefits. FUTA is typically 6% on the first $7,000 of wages, although you may qualify for credits that reduce the effective rate to 0.6%.
c) Colorado state unemployment tax
Colorado also requires employers to contribute to state unemployment insurance. Rates vary, but new household employers usually start at a lower rate.
d) Federal and state income tax
Unlike Social Security and Medicare taxes, income tax withholding is not mandatory, but many families choose to do so if their nanny requests it.
3) What’s the best way to handle nanny taxes?
The easiest way to stay on top of nanny taxes is to keep organized payroll records, track hours carefully, and set aside tax contributions throughout the year. Most families also pay in quarterly estimated tax payments to avoid a large annual expense.
Or if you’d prefer not to do it on your own, as part of our comprehensive service, we connect Colorado parents with household payroll services that calculate taxes, manage paychecks, and handle filings automatically. With the right guidance and payroll support in place, managing nanny taxes becomes a simple part of employing a trusted caregiver and enjoying the peace of mind that comes with professional in-home childcare.
Discover the ABC Nannies difference. With over 30 years of proven success, ABC connects exceptional nannies and household staff with local families who value professionalism, reliability and top-notch care.
- If you found this article useful, you might also enjoy this: What is considered full time nanny.
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