The Social Security Administration recently released next year’s Employment Coverage Threshold for household employees, commonly called the “nanny tax threshold.”
Our friends at GTM share more information below about the increase for 2025.
The Social Security Administration (SSA) recently released next year’s Employment Coverage Threshold for household employees, commonly called the “nanny tax threshold.” The 2025 nanny tax threshold increases by $100 to $2,800, marking the sixth consecutive year this threshold has increased.
If a nanny or other household employee, such as a housekeeper, private teacher, or in-home senior caregiver, earns $2,800 or more in cash wages in 2025, the family and the employee must pay Social Security and Medicare taxes, commonly called FICA taxes or “nanny taxes.” Earnings below the nanny tax threshold aren’t taxable under Social Security.
Most industries have no employment coverage threshold, so every dollar of wages is covered by Social Security and taxable.
Household employment is one of the industries with an employment coverage threshold. The nanny tax threshold may change year-to-year based on the national average wage index and is set by the SSA every October.
More information on how the nanny tax threshold is calculated.
While many full- and part-time household employees will exceed the nanny tax threshold, temporary or seasonal domestic workers like summer and after-school nannies can easily reach that threshold and trigger nanny tax compliance.
The nanny tax threshold does not apply to wages paid to a spouse, a child under 21, a parent, or an employee under 18.
Social Security and Medicare taxes are 15.3 percent of an employee’s cash wages. The employer (family) pays 7.65 percent (Social Security at 6.2 percent and Medicare at 1.45 percent), while the same amount can be withheld from the employee’s pay, or the family can pay their worker’s share and not withhold.
Families may also owe federal and state unemployment taxes. If a household employee is paid $1,000 or more in any calendar quarter, the family must pay six percent federal unemployment taxes on the first $7,000 in wages. State unemployment tax rates vary. This is an employer-only tax. Wages paid to a spouse, a child under 21, or a parent do not count toward unemployment taxes.
Introduced by the Social Security Domestic Employment Reform Act of 1994, the current version of the nanny tax threshold aims to simplify employment taxes on domestic services. The law also coordinated remitting nanny taxes with the collection of income taxes.
GTM Payroll Services relieves the administrative hassles of household payroll for domestic employers by proviing a one-stop shop for payroll, tax filings, compliance and insurance. No risk. No hassles. No worries. If you or your employer have any questions about domestic employment, call (1-800-929-9213) or email GTM for a free, no obligation consultation.