The 2027 Nanny Tax Threshold Is $3,100. Here Is What It Means for Your Household.

The number that decides when Social Security and Medicare taxes apply to a household employee is small, and in 2027 it moves up by $100.

What changed

The Social Security Administration lists the domestic employee coverage threshold at $3,000 for 2026 and $3,100 for 2027. If you pay one household employee $3,100 or more in cash wages during 2027, Social Security and Medicare taxes apply to those wages. Cash wages means pay by check, direct deposit, or cash. It does not include the value of meals or lodging.

Our partners at GTM Payroll Services flagged the change in their October newsletter. It is worth a few minutes of every family's attention before January.

Why a small number matters more than it looks

At our wage floor of $30 per hour, a household professional reaches $3,100 in just over 100 hours of work. That is less than three weeks of full-time hours.

So the threshold is not a line most households hover near. Nearly every nanny, house manager, private chef, or caregiver who works in a home with any regularity crosses it, often within the first month.

The clinical lens

Money is one of the hardest things for people to talk about, even in close relationships. In a home, it is harder still. The work is personal, the hours are long, and a good household professional starts to feel like part of the family. That closeness is a good thing, and it is also exactly why pay gets left vague.

What I see most often is avoidance, not carelessness. A family worries that bringing up payroll will make the relationship feel transactional. A household professional worries that asking about a W-2 will seem ungrateful, or put the job at risk. So neither person says anything, and an informal arrangement quietly becomes the arrangement.

The person who carries the most risk in that silence is usually the one with the least power to raise it. Without reported wages, a household professional builds no Social Security credits, has no proof of income for an apartment or a loan, and has nothing to fall back on if the job ends. The family carries risk too: back taxes, penalties, and a conversation that only gets harder the longer it waits.

Clear terms do not make a relationship colder. They take the guesswork out of it, so both people can focus on the work and on each other. In my experience, the placements with the clearest communication between employers and employees are the ones where trust grows fastest.

For families: what to do before January

• Count every dollar of cash wages, per employee, for the calendar year. Backup care, date nights, and occasional weekends count too.
• Set up payroll before the first workday. A household payroll provider can withhold, file, and keep the records for you.
• Know the paperwork. Household employers report these taxes on Schedule H with their federal return and give the employee a Form W-2 by January 31 (the next business day when that date falls on a weekend).
• Know the second trigger. Federal unemployment tax has its own test: $1,000 or more in total cash wages to household employees in any calendar quarter.
• Put pay in writing. Hourly rate, guaranteed hours, and overtime, agreed before the first day.
• Ask about exceptions. A few relationships and young workers are treated differently, for example your spouse or your child under 21. Your payroll provider will confirm what applies.

For household professionals: what it means for your W-2

• Your future benefits. Wages reported on a W-2 build Social Security credits toward retirement and disability, and they fund Medicare.
• Your proof of income. A W-2 is what a landlord, a car lender, or a mortgage broker will ask to see.
• Your safety net. Reported wages are what unemployment eligibility is built on if a placement ends. Rules vary by state.
• Your question to ask. "Will I be paid through payroll, and will I receive a W-2?" It is a professional question, not a difficult one.

The standard we hold

Nannies and household staff we place are W-2 employees of the family, with very few exceptions. Every role is set up in compliance with the law, because it protects everyone in the placement.

Planning a hire for 2027? We will make sure the role is set up correctly from the first day.

Household professionals looking for families who do this right:

General information, not tax advice. For your household's specifics, talk with your payroll provider or tax advisor. On employment questions, an employment attorney always has the final say.