What Is the Nanny Tax?

The "nanny tax" refers to the employment taxes you must pay when you hire a household employee. These taxes most commonly apply to employees working in your home such as a nanny, housekeeper, or caregiver. As an employer of a household employee, you are responsible for withholding Social Security and Medicare taxes (FICA), paying your share of FICA, and potentially paying federal unemployment tax (FUTA). You report these on Schedule H with your personal tax return. You'll also need to get an EIN and provide the employee with a W-2. Ignoring these obligations is a common (and expensive) mistake.