Most families budget for a nanny the way they would for a sitter: hourly rate times hours. That math misses roughly a seventh of the bill. Care.com’s 2026 Cost of Care Report puts the national average at $870 a week, about $21.75 an hour, for one child, which is $45,240 a year in wages for a 40-hour schedule. Add the employer’s payroll taxes, workers’ compensation, a year-end bonus and a payroll service, and a full year of care for 2027 lands at about $51,500 to $54,500 before any tax break comes back to you.
That gap exists because a nanny who works in your home is, in the eyes of the IRS and most states, your employee. You are not buying a service. You are running a one-person payroll, with paid vacation, guaranteed hours and annual raises attached. The sections below price that payroll for one year and then for three, show how far your city moves it, and cover the two arrangements that cut it by a third.
The $870 week and the $53,000 year
The table below is a hypothetical household paying the national average rate for 40 guaranteed hours a week, 52 weeks a year. Paid vacation and holidays are already inside the wage line, because a nanny on guaranteed hours is paid the same week if your family is home or at the beach.
| Line in the household budget | Year-one cost | Where the number comes from |
|---|---|---|
| Wages: $21.75 x 40 hours x 52 weeks | $45,240 | Care.com 2026 national average |
| Employer payroll taxes (Social Security, Medicare, federal and state unemployment) | $4,524 to $5,429 | 10% to 12% of wages, per HomeWork Solutions |
| Workers’ compensation policy | About $870 | Roughly one week’s gross pay a year, HomeWork Solutions estimate |
| Year-end bonus | $870 to $1,740 | One to two weeks’ pay, the norm GTM reports |
| Household payroll service (optional) | $0 to $1,200 | HomeWork Solutions example budget |
| Total before tax breaks | $51,504 to $54,479 | About 14% to 20% above wages alone |
Three costs are deliberately left out because not every family has them. Overtime is the big one: a 45-hour week at this rate adds about $8,480 a year at time and a half. An agency placement fee, typically 10% to 20% of the first year’s salary, is a one-time $4,500 to $9,000 on these wages. And if the nanny drives your children in her own car, mileage is normally reimbursed at the IRS standard rate.
The 7.65% that rides on every paycheck
Once you pay a household employee $3,000 or more in a calendar year (the 2026 threshold), you owe Social Security and Medicare taxes on the wages. GTM, a household payroll firm, reports that the threshold rises to $3,100 for 2027, the seventh straight annual increase. A full-time nanny clears either figure in the first month.
Your share as the employer is 7.65%: 6.2% for Social Security and 1.45% for Medicare. You also withhold the same 7.65% from the nanny’s pay. On top of that sits federal unemployment tax, 6% of the first $7,000 in wages but reduced to 0.6%, or $42 a year, in most states once state unemployment tax is paid. State unemployment typically runs about 2% to 5% on a state-set wage base. GTM’s worked example for a New York nanny earning $800 a week shows the family’s taxes at $87.60 per paycheck, or just under 11% of gross pay.
Paying cash under the table looks like it saves that 11%. It usually costs more. Your nanny loses Social Security credits and access to unemployment if the job ends, and you lose the two biggest tax breaks covered below, because both require you to report the caregiver’s taxpayer ID. The IRS treats unreported household wages as unpaid employment tax, with penalties and interest. Confirm your state’s filing rules with a household payroll provider or a CPA.
Guaranteed hours: paying for the week your family is away
Guaranteed hours are the industry standard, and they are where first-time employers get surprised. You agree to a set weekly number, say 40, and pay for all of it even if you come home early, a grandparent visits, or a child is sick and you stay home. The International Nanny Association describes the deal plainly: work the agreed hours or fewer, get paid the same. Hours beyond that are paid on top, and anything past 40 in a workweek is overtime at time and a half under federal law for most live-out nannies.
Paid time off is not federally required, but nannies expect it. GTM suggests 5 to 15 paid days a year; HomeWork Solutions cites two to three weeks of vacation as common, plus paid holidays. A growing list of states and cities, including New York and California, require paid sick leave for domestic workers. Check your state labor department’s rules before you write the work agreement.
One more rule worth knowing: household employees must be paid by the hour, not on a salary. You can pay a fixed weekly amount for guaranteed hours, but you still need to track time so overtime can be paid.
Three years in: raises, bonuses and the 2027 to 2029 budget
A nanny who stays is worth a great deal to a family, and she will expect raises. Care.com suggests 2% to 3% a year for cost of living plus 5% to 7% for merit. Nanny rates are also climbing on their own: the national weekly average rose 5%, from $827 to $870, in a single year of Care.com’s survey. This hypothetical keeps the household above and gives a 5% raise each January.
| Year | Hourly rate | Wages for 40 hours x 52 weeks | All-in, with taxes, comp and bonus |
|---|---|---|---|
| 2027 | $21.75 | $45,240 | $51,500 to $54,500 |
| 2028 | $22.84 | $47,502 | $54,100 to $57,200 |
| 2029 | $23.98 | $49,877 | $56,800 to $60,100 |
| Three-year total | $142,619 | About $162,400 to $171,700 |
That three-year figure is the honest comparison point when a family weighs a nanny against daycare or one parent cutting back at work.
San Antonio to San Francisco: a $31,000 spread
Where you live moves the bill more than anything else you control. These are Care.com’s posted starting rates for nannies as of May 2026, converted to a 40-hour year, with the same 14% to 20% employer overhead added.
| City | Posted starting rate | Annual wages | All-in yearly estimate |
|---|---|---|---|
| San Francisco | $30.20/hr | $62,816 | $71,600 to $75,400 |
| Seattle | $27.17/hr | $56,514 | $64,400 to $67,800 |
| Brooklyn | $24.83/hr | $51,646 | $58,900 to $62,000 |
| Denver | $24.00/hr | $49,920 | $56,900 to $59,900 |
| Washington, D.C. | $23.35/hr | $48,568 | $55,400 to $58,300 |
| Chicago | $22.64/hr | $47,091 | $53,700 to $56,500 |
| Atlanta | $22.34/hr | $46,467 | $53,000 to $55,800 |
| Phoenix | $21.38/hr | $44,470 | $50,700 to $53,400 |
| Houston | $20.33/hr | $42,286 | $48,200 to $50,700 |
| San Antonio | $18.71/hr | $38,917 | $44,400 to $46,700 |
Rates also climb with the job. Nanny Lane, which tracks more than 100,000 live listings, finds that each additional child usually adds $1 to $2 an hour, and evening or weekend coverage adds $2 to $4. Its national average is lower, at $19.11 an hour, partly because it includes part-time listings.
Two ways to cut the bill by a third
Nanny share
Two families hire one nanny together. Care.com reports that each family typically pays about two-thirds of a private rate, around $580 a week instead of $870, saving roughly $15,000 a year. The nanny earns more in total: in Care.com’s Denver example, a $24.35 solo rate becomes about $16 an hour from each family, or $32 for her.
The catch is paperwork and compromise. The IRS treats each family as a separate employer, so each needs its own tax ID and pays taxes on its own share. Schedules, sick-child rules and whose home hosts the care all need to be in writing.
Live-in nanny
Nanny Lane’s live-in listings average $16.83 an hour, below its $19.11 all-nanny average, because room and board are part of the package. You need a private bedroom, ideally with its own bathroom, and the groceries and utilities that come with another adult in the house.
Federal law exempts live-in domestic workers from overtime pay, though not from minimum wage. Several states, including New York and California, set their own overtime rules for live-ins, so a long-hours arrangement can cost more than the federal rule suggests.
What the tax code hands back for 2027
Two federal breaks offset part of the cost, and both changed for 2026 under the One Big Beautiful Bill Act. Neither is large next to a $50,000 payroll, but together they can cover a good share of your employer taxes.
- Dependent care FSA. The household limit rose from $5,000 to $7,500 starting in 2026. Money goes in before income and payroll taxes. In a 22% federal bracket, a full $7,500 saves about $2,220 in federal income and payroll tax, plus state income tax where it applies.
- Child and dependent care credit. The top rate rose from 35% to 50% for tax years starting in 2026, so the first returns to show it are the ones filed in 2027. The expense limits did not change: $3,000 for one child, $6,000 for two or more. The rate phases down as income rises and bottoms out at 20%, which works out to $600 for one child or $1,200 for two or more at higher incomes.
- You cannot count the same dollar twice. FSA money reduces the expenses eligible for the credit. A family that puts $7,500 into an FSA usually has nothing left to claim, which is why higher earners tend to favor the FSA and lower earners the credit.
Which mix wins depends on your income, state and number of children. Run both with a tax professional before your employer’s enrollment deadline.
Nanny or daycare: where the math flips
For one child, a nanny costs far more. Care.com’s survey puts average daycare at $332 a week, against $870 for a nanny, more than two and a half times as much before employer taxes. For two children the gap narrows fast, because daycare charges per child and a nanny does not. Two toddlers in daycare run about $664 a week at that average; a nanny for two toddlers averaged $952 in the same survey, plus the overhead above. By the third child, many families find the totals close enough that schedule and convenience decide it.
The pressure is real either way. The same report found the average parent spends 20% or more of household income on child care, nearly three times the 7% that federal guidelines call affordable.
Three calls to make during open enrollment
November and December are when most employers open benefits elections for January plans, which makes this the cheapest moment to set up a 2027 nanny budget.
- Your HR or benefits portal. Elect a dependent care FSA for 2027 if you will pay for care. Mid-year changes usually require a qualifying event, though the birth or adoption of a child counts as one.
- A household payroll service or your state tax agency. Get a federal employer ID number, open a state unemployment account and ask what your state requires for sick leave, pay statements and filing frequency. A service costs about $1,200 a year; doing it yourself costs time, which GTM cites an IRS estimate putting at around 60 hours a year.
- Your insurance agent. Ask whether your state requires workers’ compensation for a household employee and get a quote. If the nanny will drive your children, confirm who is covered in whose car.
Make those three calls before you post the job, and the number you offer a candidate will be the number you can afford for three years.
Quick answers on nanny pay and paperwork
How much is a nanny per month?
At the national average of $870 a week, wages come to about $3,770 a month. With employer taxes, workers’ compensation, a bonus and a payroll service spread across the year, a full-time nanny for one child works out to roughly $4,290 to $4,540 a month. Big-city rates can push that to $6,000 or more.
Do I owe nanny taxes for a part-time nanny?
Usually. The household employee threshold is $3,000 in cash wages for 2026 and $3,100 for 2027, according to GTM. A part-time nanny working 20 hours a week at Care.com’s average rate earns $435 a week and crosses that line in about seven weeks. Confirm the rules with the IRS or a tax professional.
What paperwork does a family need to employ a nanny?
Typically a federal employer identification number, a state unemployment tax account, Form I-9 to verify work eligibility, a W-4 if you withhold income tax, and a W-2 for the nanny by January 31. Federal household employment taxes are reported on Schedule H with your own tax return. State requirements vary.
How much more does a nanny charge for two kids?
Nanny Lane finds that each additional child usually adds $1 to $2 an hour. Care.com’s survey shows a smaller jump for toddlers: $936 a week for one and $952 for two. A nanny who also handles a newborn alongside an older child may ask for more.
Is a nanny share legal if care happens in one family’s home?
Yes. The IRS treats each family as a separate household employer even when all the care takes place in one home, according to Care.com HomePay. Each family pays and reports taxes on its own share, so both need to register as employers.
Other costs that arrive with a new baby
- Daycare costs by the week, after tax breaks
- What having a baby costs after insurance pays its part
- Adoption costs, and what comes back in credits
- IVF costs per cycle and per baby
- Surrogacy costs, stage by stage
Every family expense in one place: Family Costs in 2027: The Complete Guide From Pets to Funerals
Pricing method: prices were researched in November 2026 for 2027 planning and may change. Nanny rates come from the Care.com 2026 Cost of Care Report and its city rate data (May 2026) and from Nanny Lane listing data; employer cost estimates use HomeWork Solutions and GTM guidance; tax figures reflect the One Big Beautiful Bill Act changes for 2026 and GTM’s report of the 2027 household employee threshold. The yearly budgets are illustrative examples, not quotes. Tax and labor rules vary by state; confirm with a tax professional or your state agency. See our disclaimer.
