As experts in the private household staffing industry, we are often asked about the technicalities of employing household staff, especially when it comes to the topic of taxes! If you’re hiring a nanny for the first time, or you’re getting ready for filing your taxes, here is exactly what you need to know about tax when hiring a nanny, house manager, housekeeper or other member of household staff.

Do I have to pay my Nanny as a W-2 Employee?

Without a question….Yes! Absolutely! Paying your Nanny legally is imperative and one of the requirements we set out when you register with us at My Household Managed. If you employ someone to work in your home and they make $2,700 or more in gross wages in 2024 (or $2,600 in 2023), then you need to pay tax for them!

Is a Nanny an independent contractor?

No. Nannies are NOT independent contractors and therefore must be set up as W-2 employees. This is because families set out the nanny’s role, duties, and hours and provide guidance for how a certain job should be done. Most often, a family will also provide all of the equipment and supplies required to fulfil a nanny’s job also. Read more about why nannies and housekeepers should be classified as employees instead of contractors here.

Is hiring a Nanny tax-deductible?

Whilst hiring a nanny isn’t tax-deductible in the way that other things may be, there are certain benefits that you can take advantage of when hiring a nanny to offset your tax costs if relevant. Read more about the tax benefits of hiring a nanny here. Importantly, these are only applicable when you pay your nanny legally!

We always recommend speaking with a professional to help you navigate the complexity of taxes. Misclassification counts as tax evasion so make sure you are compliant!

Can I pay my Nanny through Venmo?

No! Whilst some nannies may say they are comfortable accepting payment via Venmo or in cash, we never recommend it. In fact, at My Household Managed we require that all of our hiring families pay their household employees via payroll to support this industry best practice.

Also it is important to note that Venmo are required to report certain transactions to the IRS.

“For the tax year 2023, the IRS will require reporting of payment transactions for goods and services sold that exceed $20,000 and 200 transactions. Some states have lower reporting thresholds. For Illinois, (IL): > $1,000 and 4+ separate transactions.” - Venmo Tax FAQ

Why should I pay my Nanny legally?

Other than the obvious tax implications (which in itself should be enough!), it has never been more important to properly compensate your nanny or household employee. Not only are you more likely to attract higher-calibre talent but you are also more likely to retain high-quality staff if they see you are treating them as a “proper employee”.

Nannies, and other household staff, need a verifiable income and employment history just as any other professional would. If they want to rent an apartment, buy a home or a car or take out a loan, they will require proof of income and employment. Similarly, if for any reason they need to claim benefits (as in the Covid-19 pandemic), nannies will have to prove their income in order to file. Nannies are often not provided with official retirement funds and so will also most likely need access to social security and medicare benefits upon retiring, all of which requires them to be paid as W-2 employees whilst working.

Lastly, as per the Affordable Care Act requires that people have health insurance. Whilst a lot of nannies will buy their insurance policies on the marketplace, they may be eligible for income tax credits if they are paid legally. Not to mention, if you offer your nanny or household employee a healthcare stipend, you may be eligible for tax benefits too!

Do I have to set up a W-2 for part-time help?

Yes. Setting up your employee as a W-2 is not only for full-time nannies, rather it is based on their gross income. As mentioned above, you will need to pay nanny taxes if you employ someone to work in your home and they make $2,700 or more in gross wages in 2024 (or $2,600 in 2023). This isn’t just unique to nannies either but also includes after-school tutors, babysitters with set, regular hours, housekeepers, house managers and anyone else that works in your home.

Do I have to give my nanny a written contract in Chicago?

Yes! Whether you are hiring a nanny, housekeeper or other household employee, Chicago mandates that employees must be given a written contract in the language of their choice. This contract will include details such as duties, compensation, hours, paid time off and any benefits you may want to offer. Learn more about the importance of contracts for household staff here.

Can part-time help contract through My Household Managed?

No. At My Household Managed, we do not employ household staff. We can support you in the hiring process but all staff must be employed by the families who are hiring them. Read more about our staffing process here.

How can a domestic staffing agency like My Household Managed help me hire a nanny?

Agencies like My Household Managed are there to make the process of hiring household staff like nannies or housekeepers easier. If you’re a high-net-worth family or individual looking to streamline your household duties by hiring private staff, we take the stress out of finding trustworthy, reputable, high-calibre applicants by offering you access to our pool of pre-screened candidates. Not only this but we work closely with clients and candidates to make sure that employees are matched for success with prospective employers. Read more about the benefits of using a household recruitment agency like My Household Managed here.

In 2024, it's never been more important for employers to understand and uphold the rights of their household staff. Just like any other employee, nannies, housekeepers, and household staff are entitled to certain rights and protections under labor laws. These rights may include minimum wage laws, overtime pay, meal and rest breaks, and protection from discrimination and harassment in the workplace.

As an employer, it's your responsibility to familiarize yourself with these laws and make sure you are compliant. Failure to do so can result in legal consequences and damage to your reputation as a responsible employer. What’s more, respecting your employees' rights and providing them a safe work environment leads to a much-more positive work environment and strengthens the employer-employee relationship.

You’ve got enough on your plate in your day-to-day life — let us make your life easier by handling your unique household staffing needs.

If you are a family looking for staff for your private household or other home service, register with My Household Managed.

If you are looking to work within a private household, apply at My Household Managed.