How to Hire a Nanny Legally in the US (2026 Guide)

By AyiConnect • August 10, 2026 • 8 min read

Hiring a nanny is one of the most important decisions a family makes. But navigating the legal requirements — taxes, work authorization, payroll — can feel overwhelming. This guide walks you through every step, from verifying eligibility to filing taxes, so you can hire a vetted caregiver with confidence and stay fully compliant.

Step 1: Understand Your Legal Obligations

Under US law, if you pay a household employee $2,700 or more in a calendar year (2026 IRS threshold), you are considered a household employer. This triggers several legal requirements:

• Form I-9 (Employment Eligibility Verification): Must be completed within 3 days of hire. This verifies the caregiver's identity and work authorization.
• Employer Identification Number (EIN): Apply online at IRS.gov — free, takes 10 minutes.
• State Tax ID: Most states require separate registration for unemployment insurance and state income tax withholding.
• Workers' Compensation Insurance: Required in most states for household employees. Protects both you and your nanny in case of work-related injury.

Step 2: Nanny Taxes Breakdown

Nanny taxes are shared between employer and employee:

*FUTA is typically 0.6% after the 5.4% state credit. Check with your state for exact rates.

Step 3: Payroll Setup

Most families use a nanny payroll service to handle tax calculations, filings, and direct deposit. Popular options include HomePay (by Care.com), Poppins Payroll, and GTM Payroll Services. Costs range from $45-65/month.

A payroll service will:

• Calculate gross-to-net pay with proper withholdings
• File quarterly state and federal tax returns
• Generate year-end W-2 and Schedule H documents
• Handle direct deposit to your nanny's bank account

Step 4: Work Authorization Verification

All caregivers on AyiConnect are pre-screened for work authorization. When hiring directly, always verify:

• US Passport, Permanent Resident Card (Green Card), or Employment Authorization Document (EAD)
• Social Security Card (original, not laminated)
• State-issued ID or driver's license for photo verification

Never accept photocopies alone. Physically examine original documents and complete Form I-9.

Step 5: Draft an Employment Contract

A written contract protects both parties. Include:

• Start date, schedule (hours/week), and work location
• Hourly rate or salary, overtime policy (1.5x after 40 hours in most states)
• Paid time off, sick days, and holiday schedule
• Job duties and responsibilities clearly defined
• Termination notice period (typically 2-4 weeks)
• House rules and confidentiality expectations