Babysitting Taxes: Do You Have to Pay Taxes as a Babysitter?

It isn't difficult to find instances of people being paid for what some view as "working under the table" in America. It could be anyone, including neighborhood children, offering informal snow shoveling services in the winter, lawnmowing in the summer, and babysitting throughout the year. These services are usually paid in cash and go unreported to the Internal Revenue Service (IRS), and it's not due to widespread criminality. Many of these payments are rare enough and don't meet reporting standards or thresholds, but what happens when they do? What are the responsibilities of the payor and the payee in that instance?

Whether you've paid for babysitting services or performed them, it's important to understand any associated tax responsibilities you may have to attend to. Sitters, nanny caregivers, and those who use their services should read this article to understand what they should do from a tax perspective to ensure overall compliance while avoiding penalties and other babysitting tax issues. 

Navigating Babysitting Taxes: For Employers

If you use a babysitter rarely or haven't paid them much, you won't have to fulfill any tax responsibilities. However, regular usage may require you to take certain tax actions and may even change the intended nature of your relationship with your babysitter or nanny. 

Tax Forms for Your Babysitter

The babysitter or nanny you've hired could be classified as a self-employed independent contractor/freelancer or an employee. Their classification impacts your tax responsibilities.  

For Independent Contractors

If your babysitter or nanny is self-employed, you won't have many responsibilities outside of paying them for their services. Because this is a personal expense, you wouldn't issue a 1099, nor do you have to withhold taxes from their pay.

Your self-employed nanny or babysitter is responsible for reporting their income to the appropriate government agencies by each deadline. 

For Employees: The Nanny Tax

If your nanny qualifies based on clear IRS standards, they will be viewed as an employee from a tax standpoint.

If you control not only your nanny's work but how it is done in your home, they will be considered a household employee. Because of this, you will have additional tax responsibilities to fulfill.

If you will pay your nanny $2,800 or more in 2025 (it was $2,700 in 2024), you must withhold Social Security and Medicare taxes, called the Federal Insurance Contributions Act (FICA) tax. You will withhold 6.2% for Social Security and 1.45% for Medicare, totaling  7.65%, and then match those contributions.

While you and your nanny will contribute to FICA, you will be solely responsible for paying the Federal Unemployment Tax Act (FUTA) tax should you qualify. If you paid your nanny $1,000 or more in cash wages in a quarter during the calendar year, FUTA will apply to the first $7,000 in earnings. The FUTA tax rate is 6%, which can be reduced via an up to 5.4% tax credit for amounts paid into your state's unemployment fund. Tax credits allow you to minimize your annual tax burden and are applied to the babysitter taxes you owe when your return is filed during tax season in April.

Because your nanny is considered a household employee, you must issue a completed IRS Form W-2, Wage and Tax Statement so they can prepare and file their taxes. 

Childcare Tax Credits

You can take the Child and Dependent Care credit if you paid your nanny to care for a child, dependent, or spouse so you can work or pursue employment.

To qualify, your nanny must take care of a dependent who is 13 or younger or a spouse or a dependent who cannot fully care for themselves and lives with you for half a year or more. This credit is calculated based on your annual income and a percentage of related expenses for this care. 

Navigating Babysitting Taxes: For Babysitters

Whether you're a self-employed babysitter or a nanny classified as a household employee, you will have tax responsibilities associated with your babysitting income. 

Tax Filing for Babysitters/Nannies: Independent Contractors

If you made $400 or more annually from working as a self-employed babysitter, you must report your income via an annual return and make quarterly estimated tax payments.

If you performed services for a small business totaling $600 or more, they will send IRS Form 1099-NEC, Nonemployee Compensation, to use as supporting documentation for your return. However, it is possible that you are babysitting for individuals who are not required to send you a 1099, but you will still have to report that income.

Use the following forms and schedules to prepare and file your taxes. 

IRS Form 1040

Individual taxpayers file IRS Form 1040, U.S. Individual Income Tax Return. Form 1040 calculates your federal taxable income and tax liability. You should also file schedules to report your self-employed income: Form 1040 Schedules C and SE.

Form 1040, Schedule C

Unless you elect to form as a different business entity, you will be a sole proprietor for federal income tax purposes. To report business income and business expenses, you should file IRS Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Schedule C calculates your business income or loss from babysitting self-employment.

Form 1040, Schedule SE

You must also pay the 15.3% self-employment tax on your freelance income. Sole proprietors must calculate self-employment tax liability using IRS Schedule SE (Form 1040), Self-Employment Tax. These contributions are handled via FICA for W-2 employees.

Quarterly Estimated Taxes 

Self-employed babysitters must estimate and pay quarterly estimated taxes throughout the tax year. Quarterly estimated tax payment due dates for 2025 include the following: 

• April 15, 2025

• June 16, 2025

• September 15, 2025

• January 15, 2026

IRS Form 1040, ES

Use IRS Form 1040-ES, Estimated Taxes for Individuals, to calculate and pay your quarterly estimated taxes. The form includes payment vouchers and instructions for filing online.

Tax Deductions for Babysitters/Nannies

A tax deduction is used to reduce your babysitting taxable income. You’ll then pay taxes on this lowered income amount. Here are some of the top examples of tax deductions to consider:

• Health insurance: Self-employed babysitters with independent healthcare plans can deduct this cost from their annual tax returns.

• Home Office Deduction: If you have a regular and established babysitting workplace in your home, the associated costs can be deducted from your taxes.

• Advertising and Marketing: These activities help spread the word about your babysitting business. It’s an added benefit that some of these expenses are tax-deductible, including ads, printing materials, and design.

Tax Filing for Full-Time Nannies

The tax obligations for a nanny who is considered a household employee are vastly simplified versus self-employed babysitters. While your employer is not required to withhold federal income taxes, they can do this on your behalf once you submit a completed IRS Form W-4, Employee's Withholding Certificate. Unlike self-employed babysitters, you won't have to calculate and file quarterly estimated taxes multiple times per year as your employer implements tax withholding on your behalf.

Instead, you will be responsible for submitting Form 1040 to the IRS by the April 15, 2025 deadline. You would use the information contained in the W-2 sent by your employer to prepare your taxes. 

Get Expert Help with Babysitting Taxes

Efficiently addressing your nanny or babysitting tax responsibilities as you care for others can be challenging. As your career matures and grows, it will demand more time and energy, leaving fewer and fewer opportunities to address your complex financial work and maximize your tax refund. That's why many babysitters and nannies trust the tax professionals at 1-800Accountant, America’s leading virtual accounting firm, to file taxes on their babysitter income.

Whether you need personal income tax preparation, tax filing for freelancers, or any of our professional accounting services, we have the affordable, tax-deductible solutions you need to ensure you remain compliant with a minimal tax burden. Schedule a quick consultation–usually 30 minutes or less—to learn more.