Childcare is one of the largest monthly expenses for most families, often rivaling rent or mortgage payments. For families who employ professional nannies, the financial commitment is significant but essential. At Westside Nannies, we believe in helping families navigate every aspect of the caregiving journey, including how public policy may impact their household dynamics and financial planning.

With every piece of legislation that gets signed into law, we carefully review changes that could positively or negatively affect the families we serve and the nannies we represent. The most recent bill signed into law, officially named the “One Big Beautiful Bill Act” (OBBBA), includes a few key provisions that are worth exploring for their potential financial benefits.

1) Tax Savings for Families Hiring Nannies

a) Higher FSA Contribution Limits for Childcare

Beginning January 1, 2026, families will be able to contribute up to $7,500 per year into a Dependent Care FSA (up from $5,000), with a limit of $3,750 per spouse for married couples filing separately.

• Pre-tax advantage: This contribution is deducted from taxable income, potentially saving families 20% to 37% depending on their tax bracket.
• For Westside Nannies families: If a family is paying their nanny $35–$40/hour for 40 hours/week, this equals $72,800–$83,200/year in childcare expenses. The $7,500 FSA cap saves roughly $2,625 per year in taxes for high earners.

b) Expanded Child & Dependent Care Tax Credit (CDCTC)

The bill adds $16 billion to enhance the CDCTC, a credit that offsets a portion of childcare costs up to a certain limit.

• No income phase-out: Unlike many tax credits, the CDCTC expansion does not phase out at high income levels, making it fully available to many Westside Nannies families.
• Estimated value: Eligible families could receive $1,200–$2,000 per year in tax credits depending on expenses and tax liability.

2) How Families and Nannies Benefit from OBBBA

This new legislation could shape the professional nanny landscape in ways that improve access, stability, and earnings.

a) Increased Demand for Private Nannies

With more tax-advantaged tools available, families may feel empowered to hire or retain a nanny, especially if they were previously deterred by cost.

• The typical cost of professional, full-time nanny care can exceed $80,000/year.
• With nearly $5,000 in potential annual tax savings, private nanny care becomes more financially feasible for some households.

b) Longer-Term and More Consistent Employment

Tax savings may encourage:

• Longer contracts instead of short-term placements
• Full-time roles instead of part-time support
• Year-round coverage (including travel) instead of gaps during school breaks

This improves job stability for nannies and minimizes turnover for families.

c) Improved Compensation Potential

As additional resources free up for some families, they may:

• Pay more competitive wages
• Offer overtime and holiday bonuses
• Retain quality caregivers with more attractive packages

This strengthens the market for professional nannies and ensures caregivers are compensated fairly for their expertise.

3) A Quick Note on Legal Employment

To take advantage of these tax benefits, both the Dependent Care FSA and the CDCTC, families must pay their nanny legally as a household employee. This means:

• Obtaining an Employer Identification Number (EIN)
• Issuing regular paychecks with appropriate withholdings
• Paying employment taxes
• Providing a W-2 at year’s end

Families who pay “under the table” or misclassify their nanny as an independent contractor are not eligible for these savings and may face penalties.

4) Real-World Savings Scenarios

Here’s a breakdown of how OBBBA’s savings could impact a family with a full-time nanny:

Hourly Rate	Weekly Hours	Annual Nanny Cost	FSA Savings (up to $7,500)	CDCTC Estimate	Total Annual Savings
$35	40	$72,800	~$2,625	$1,200–$2,000	$3,825–$4,625
$40	40	$83,200	~$2,625	$1,200–$2,000	$3,825–$4,625

5) Additional Considerations

a) No Direct Wage Subsidies for Nannies

The bill supports families and businesses but does not provide direct financial assistance to nannies. Benefits are indirect. Nannies may gain access to more jobs, longer contracts, and potentially better pay as families benefit from tax relief.

b) Broader Impacts and Equity Concerns

OBBBA reduces funding for programs like Medicaid and SNAP, adds work requirements, and tightens eligibility for immigrants. While helpful for some, these cuts may negatively impact vulnerable households and populations.

The One Big Beautiful Bill Act introduces a powerful incentive structure for families to invest in high-quality, private childcare. For some Westside Nannies families, this translates into thousands of dollars in tax relief on care they already prioritize. And for professional nannies, this may usher in a new era of stability, consistency, and earning potential.

Westside Nannies is not a licensed tax advisor or legal professional. We recommend speaking with your tax professional or a trusted law expert for personalized advice.