Nanny and babysitter taxes and retirement for 2026
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Where nannys typically get paid
W-2 or 1099?
A nanny who works regularly in one family's home under their direction is usually that family's household employee, so the family should withhold Social Security and Medicare and give you a W-2 once wages pass the IRS annual threshold. Occasional babysitters serving many families with their own schedule may be self-employed.
Know whether you're a household employee
The IRS says a family that controls not only what work is done but how it is done is usually your employer. Then the family withholds and pays its share of Social Security and Medicare, instead of you paying self-employment tax.
Self-employed sitters pay SE tax
If you're truly independent, you pay 15.3% self-employment tax on 92.35% of net profit once net earnings reach $400. Half of it is deductible.
Quarterly taxes if nothing is withheld
If you expect to owe $1,000 or more for 2026, estimated payments are due April 15, June 15 and Sept. 15, 2026, and Jan. 15, 2027.
Retirement on a nanny income
Anyone with earned income can contribute up to $7,500 to an IRA in 2026 ($8,600 if 50+), with Roth eligibility phasing out at $153,000–$168,000 MAGI (single). Self-employed sitters can also use a SEP IRA or Solo 401(k).
Nanny questions, answered
Should my family give me a W-2 or a 1099?+
Most full-time nannies are household employees, so a W-2 is usually correct once wages pass the IRS annual threshold. A 1099 is generally not the right form for a household employee.
I babysit for several families. Do I owe taxes?+
Yes. Earnings are taxable, and if you're self-employed you owe self-employment tax when net earnings reach $400. You may need to pay quarterly estimates.
Do apps like Care.com send me a 1099?+
Care.com is mainly where families find and hire you; the family is usually the one paying you. Payment apps only send a 1099-K for 2026 when payments exceed $20,000 and 200 transactions, and income below that is still taxable.
Can nannies and babysitters deduct tips?+
Yes, nannies and babysitters are on the IRS tipped occupation list (code 508). Voluntary tips reported on a W-2, 1099 or Form 4137 can qualify for a deduction of up to $25,000 for 2025–2028; your regular pay does not count.
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