Nanny Taxes in Texas: Household Employer Rules for 2026

TL;DR: If you hire a nanny directly in Texas, you are usually a household employer. In 2026 that means Social Security and Medicare taxes once you pay one nanny $3,000 or more in cash wages, federal and Texas unemployment tax once you pay $1,000 in a calendar quarter, and a W-2 and Schedule H at tax time. When you hire through Southwest Domestics, the nanny is our W-2 employee and we handle the payroll taxes, so you do not run nanny payroll yourself.

This page is general information, not tax or legal advice. Rules and amounts change, so check the IRS and TWC sources below or ask a tax professional about your situation.

Are you a household employer?

The IRS says you have a household employee if you hire someone to do household work and you control not only what work is done but how it is done. Nannies, babysitters, housekeepers, maids, cooks and drivers are all on the IRS list of household workers. It does not matter whether the work is full-time or part-time, or whether you found the worker through an agency’s list.

The IRS also says that if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee. That is the key difference between hiring a nanny directly and hiring one who stays on an agency’s payroll.

Federal nanny taxes in 2026 (IRS Publication 926)

  • Social Security and Medicare: these apply once you pay one household employee $3,000 or more in cash wages in 2026. Each side owes 7.65% (6.2% Social Security and 1.45% Medicare), so 15.3% in total. You can withhold the nanny’s share or pay it yourself. Social Security tax stops at $184,500 in wages.
  • Federal unemployment (FUTA): this applies if you pay $1,000 or more in total cash wages to household employees in any calendar quarter of 2025 or 2026. The tax is 6% of the first $7,000 of each employee’s wages, and a credit of up to 5.4% for state unemployment tax paid on time can bring it down to 0.6%. You pay it yourself; it is not withheld from the nanny’s pay.
  • Federal income tax: you are not required to withhold it. You can withhold it if your nanny asks and you agree, using the nanny’s Form W-4.
  • Who doesn’t count: wages paid to your spouse, your child under 21, your parent (with some exceptions), or a worker under 18 whose main job is not household work are left out of Social Security and Medicare. Spouse, child under 21 and parent are also left out of FUTA.

Texas rules (Texas Workforce Commission)

  • When you become liable: the TWC treats you as a liable employer once you pay $1,000 or more in cash wages for domestic service in a calendar quarter.
  • Registration: liable employers must register with the TWC within 10 days of becoming liable.
  • What is taxed: the first $9,000 paid to each employee in a calendar year. The tax is paid by the employer and is not taken out of the nanny’s pay.
  • When to report: wage reports and payments are due quarterly, by the last day of the month after each quarter ends. An employer with only domestic workers can elect to report and pay once a year by filing Form C-20 by December 31 of the year before; the annual payment is then due January 31.
  • No state income tax: Texas has no state income tax, so there is nothing to withhold for the state.

A direct-hire checklist

If you are the employer, IRS Publication 926 lists these steps for a 2026 household employee:

  1. Confirm the nanny can legally work in the United States by completing Form I-9 by the first day of work.
  2. Get an employer identification number (EIN) from the IRS.
  3. Record each payday: wages paid and any taxes withheld. Keep payroll records for at least 4 years.
  4. Give the nanny Form W-2 and send Copy A with Form W-3 to the Social Security Administration by February 1, 2027.
  5. File Schedule H with your 2026 Form 1040 by April 15, 2027, and pay the taxes through extra withholding from your own pay or estimated tax payments.
  6. Register with the TWC if you meet the $1,000 quarterly test, and file its wage reports.

Overtime and minimum wage

Nannies working in private homes are covered by the federal Fair Labor Standards Act. A nanny who does not live in your home must generally be paid at least minimum wage and time and a half for hours over 40 in a workweek. A live-in nanny employed by a family may be exempt from overtime but must still be paid at least minimum wage for all hours worked, and the employer must keep a record of hours. See DOL Fact Sheet 79B for what counts as live-in.

Put the job in writing

Whoever the employer is, a short written agreement prevents most disputes. Cover the schedule and guaranteed hours, the hourly rate and overtime, duties, driving and car use, time off, and how either side ends the arrangement.

What changes when you hire through Southwest Domestics

  • We are the employer: our nannies are Southwest Domestics W-2 employees.
  • We handle payroll taxes: you do not set up nanny payroll or calculate household employment taxes yourself. Ask your tax advisor how this applies to your own return.
  • What you pay us: a one-time $175 registration fee, no finder’s fee, and an hourly rate by experience class on our rates page. See how our fees compare with other Houston agencies.
  • Screening: every placement includes a criminal background check, sex offender registry search, driving record check, reference checks, and Social Security number and identity verification, rerun for every placement. See how we screen.
  • Replacements: unlimited and free until you are happy.
  • Timing: placement typically takes under one week.

Agency fees for getting a care provider can also count as work-related expenses for the federal child and dependent care credit, according to IRS Publication 503, if you meet its other tests.

Still deciding how to hire? Read how to hire a nanny in Houston or the Houston nanny FAQ.

Frequently asked questions

Do I have to pay nanny taxes in Texas?

If you hire a nanny directly and pay one nanny $3,000 or more in cash wages in 2026, you generally owe Social Security and Medicare taxes. If you pay $1,000 or more in cash wages to household employees in any calendar quarter, you generally owe federal unemployment tax and Texas unemployment tax through the Texas Workforce Commission. See IRS Publication 926.

Does Texas have a state income tax on nanny pay?

No. Texas has no state income tax, so there is no state income tax to withhold. Federal taxes and Texas unemployment tax can still apply.

When do I have to register with the Texas Workforce Commission?

The TWC treats you as a liable domestic employer once you pay $1,000 or more in cash wages for domestic service in a calendar quarter. Liable employers must register with the TWC within 10 days of becoming liable.

Can I pay my nanny as a 1099 contractor?

Usually not. The IRS says a household worker is your employee if you control not only what work is done but how it is done, and it lists nannies as household workers. Ask a tax professional about your situation.

What forms does a household employer file?

Under IRS Publication 926, a household employer generally needs an EIN, a completed Form I-9, a Form W-2 for the nanny with Form W-3 sent to the Social Security Administration, and Schedule H with the family’s Form 1040. Texas employers also file TWC wage reports.

Do nannies get overtime?

Under the federal Fair Labor Standards Act, nannies who do not live in the home must generally be paid time and a half for hours over 40 in a workweek. Live-in domestic workers employed by a family may be exempt from overtime but must still be paid at least minimum wage. See DOL Fact Sheet 79B.

If I hire through Southwest Domestics, who pays the nanny’s taxes?

Our nannies are Southwest Domestics W-2 employees, and we handle the payroll taxes. The IRS says that if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee. Ask your tax advisor how this applies to you.

Can agency fees count toward the child and dependent care credit?

IRS Publication 503 says fees you pay an agency to get the services of a care provider can count as work-related expenses for the child and dependent care credit, if you meet the other tests. Ask your tax advisor whether you qualify.

Sources

Not tax advice. Southwest Domestics is a household staffing agency, not a tax preparer. For advice about your own taxes, talk to a CPA or other tax professional.

Contact Southwest Domestics

Southwest Domestics
13847 Stafford Rd, Stafford, TX 77477
(713) 789-5437
Mon-Fri, 9 a.m. to 5 p.m.
southwestdomestics@gmail.com

Ready to skip nanny payroll? Call (713) 789-5437 or start a new client request, and we will set up a free consultation and interviews at our Stafford office.

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