For families
Paying legally: what W-2 employment means for your family
A plain-language guide to household employer taxes and W-2 nanny payroll for families in Texas.
Is a nanny a W-2 employee or a contractor?
A nanny is almost always a household employee, not an independent contractor, because the family controls how and when the work is done.
That means the family is a household employer and the nanny should receive a W-2, not a 1099.
What taxes does a household employer pay?
Household employers withhold and pay Social Security and Medicare taxes once a nanny's annual wages pass the IRS threshold, which is adjusted each year.
Federal unemployment tax applies if you pay household employees $1,000 or more in any calendar quarter. Texas has no state income tax, but Texas employers may owe state unemployment tax through the Texas Workforce Commission. Check current thresholds with the IRS and TWC each year.
How do families handle nanny payroll?
Most families use a household payroll service that calculates withholding, files the returns, and issues the W-2.
Paying legally protects both sides: the nanny builds Social Security credit and can show income, and the family avoids penalties and may qualify for dependent care tax benefits.
Frequently asked questions
Do I have to pay taxes for my nanny?
Yes, once her wages pass the IRS household employee threshold for the year. Most families use a household payroll service.
Can I pay my nanny as a 1099 contractor?
Generally no. Nannies are household employees because the family directs their work, so they should receive a W-2.
Does Texas have state income tax withholding for nannies?
No. Texas has no state income tax, though state unemployment tax may apply through the Texas Workforce Commission.
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