For nannies providing invaluable care and support to families in the Golden State, California nanny taxes can seem like a daunting topic to tackle each year. And while navigating the tax landscape can be a bit overwhelming, Westside Nannies has got you covered. We’ll walk you through the steps needed to get it done the right way.
(Please note: while there may be some overlaps between CA and other states, this guide speaks to the specifics of filing taxes in California.)
1) Are You a Household Employee or an Independent Contractor?
The very first step in sorting out your California nanny taxes is understanding your employment classification. In almost every case, nannies are classified as household employees, with the family they work for acting as the employer. This is true regardless of whether you found the position through a referral agency like Westside Nannies, online, or on your own. As a referral agency, Westside Nannies connects you with families but is not your employer.
The IRS looks at one key question: Does the family control what you do and how you do it? If the answer is yes, you’re an employee, not an independent contractor. For nannies, the answer is almost always yes.
Why does this matter? Your classification determines which forms you file, which taxes you owe, and what obligations your employer has. Getting this right is the foundation of everything else.
2) Know Your Thresholds: When Do Taxes Apply?
Not all nanny income automatically triggers the same tax requirements. Here are the key thresholds you need to know for the 2025 tax year:
- FICA taxes (Social Security and Medicare): If a family paid you $2,800 or more in 2025, they are required to withhold and pay FICA taxes on your behalf. This threshold was $2,700 in 2024 and increases to $3,000 for the 2026 tax year.
- Federal Unemployment Tax (FUTA): If a family paid $1,000 or more in any calendar quarter to household employees collectively, they owe federal unemployment taxes on the first $7,000 of your wages. This is an employer-only tax; it does not come out of your paycheck.
- California State Disability Insurance (SDI): California requires SDI withholding from your wages at 1.2% of all wages in 2025 (rising to 1.3% in 2026). As of January 1, 2024, there is no wage cap on SDI contributions, meaning every dollar you earn is subject to this deduction.
If you earn below the FICA threshold from a single family ($2,800), you may receive a Form 1099-NEC instead of a W-2. In that case, you would file as self-employed and owe self-employment taxes on that income. This is uncommon for full-time nannies, but can apply to part-time or short-term arrangements.
3) Getting Your W-2: What to Expect and When
If you are a household employee and your family met the tax thresholds above, they are required by law to provide you with a Form W-2 by January 31 of each year. Your W-2 shows your total earnings and the amount of taxes withheld from your paychecks throughout the year. You will need it to complete both your federal and California state tax returns.
If January 31 has passed and you have not received your W-2, reach out to your employer right away. If necessary, you can contact the IRS at 1-800-829-1040 for assistance if the form does not arrive after following up with your employer.
Hold onto your W-2. It is one of the most important documents in your California nanny tax filing, and you will reference it throughout the process.
4) Federal Taxes: What You Owe and How to File
As a household employee, you file your federal taxes the same way most workers do, using Form 1040 and the information from your W-2. Here is a breakdown of the federal taxes that apply to you:
- Social Security tax: 6.2% of your wages, up to a wage base of $176,100 in 2025. Your employer matches this amount.
- Medicare tax: 1.45% of all your wages, with no wage cap. Your employer also pays 1.45%. If your total wages from all sources exceed $200,000, an additional 0.9% Medicare surtax applies.
- Federal income tax: Your employer is not required to withhold federal income tax unless you both agree to it in writing using Form W-4. If no withholding was set up, you may owe income taxes when you file.
Use the information on your W-2 to complete Form 1040. If you worked for more than one family during the year, you will have a W-2 from each employer and will need to combine all income on a single return.
5) California State Taxes: What Makes the Golden State Different
California has several requirements that go beyond federal rules, and they are an important part of understanding your California nanny taxes as a whole.
- California Personal Income Tax (PIT): You owe California state income tax on all wages earned in the state. California uses a progressive tax rate that ranges from 1% to 13.3% depending on your income level. File using Form 540 (California Resident Income Tax Return). Your employer may or may not have withheld state income tax from your paychecks; check your W-2 to see.
- State Disability Insurance (SDI): California requires your employer to withhold SDI from your wages. The 2025 rate is 1.2% on all wages with no cap, rising to 1.3% in 2026. SDI funds short-term disability benefits and Paid Family Leave, which you are entitled to use if you are unable to work due to illness, injury, pregnancy, or caregiving needs.
- California Earned Income Tax Credit (CalEITC): Depending on your income, you may qualify for the CalEITC, a refundable state credit that can reduce your tax bill or generate a refund. Check the California Franchise Tax Board website for current income limits.
File your California state return through the Franchise Tax Board. You can file for free at ftb.ca.gov if your income falls within the eligibility limits for their free filing program ($244,857 if filing single or married filing separately, $367,291 for head of household, or $489,719 if married filing jointly).
6) Deductions Nannies Often Miss
When reporting your income, you may be able to reduce your taxable income through legitimate work-related deductions. These are easy to overlook but worth knowing about:
- Work-related expenses you paid out of pocket: If you purchased supplies, materials, or resources directly related to your job and your employer did not reimburse you, these may be deductible. Keep receipts and records throughout the year.
- Mileage: If you drove your own vehicle as part of your job duties, such as taking children to appointments or activities, and were not reimbursed, you may be able to deduct mileage. California employers are actually required to reimburse work-related mileage, so speak with your employer if this has not been addressed.
- Professional development: Costs for relevant training, certifications, or courses related to childcare or early education may be deductible.
Keep organized records throughout the year. A simple folder, whether physical or digital, for receipts and notes on work-related expenses can make a meaningful difference when you sit down to file.
7) Estimated Quarterly Taxes: Do You Need to Pay Them?
If your employer did not withhold federal or California income tax from your paychecks, you may need to make estimated quarterly tax payments to avoid penalties when you file. This is one of the more commonly missed steps for nannies navigating California nanny taxes for the first time.
The IRS and California Franchise Tax Board both require estimated payments if you expect to owe $1,000 or more (federal) or $500 or more (California) in taxes for the year after accounting for any withholding.
Federal estimated payments are made using Form 1040-ES, with due dates typically falling in April, June, September, and January. California estimated payments use Form 540-ES, on a similar schedule.
The simplest way to avoid this situation going forward is to complete a Form W-4 and ask your employer to withhold federal income tax, and a DE-4 form for California state withholding. Most employers are willing to do this when asked.
8) Where to Get Help
Navigating California nanny taxes does not have to be a solo effort. These are the most reliable official resources to bookmark:
- IRS Publication 926: Household Employer’s Tax Guide (made for employers, but helpful for employees, too; updated annually for the latest thresholds and requirements)
- California Franchise Tax Board (FTB) (state income tax filing, CalEITC, free filing options)
- California Employment Development Department (EDD) (SDI, Paid Family Leave, unemployment benefits)
- IRS Free File (free federal filing if your income falls within eligibility limits)
If your situation feels complicated, such as working for multiple families, having a mix of W-2 and 1099 income, or being newly self-employed in addition to nanny work, a tax professional who has experience with household employment can be a worthwhile investment for that first year.
Understanding your California nanny taxes, from knowing your employment status to filing both federal and state returns correctly, puts you in the best possible position to handle tax season with confidence. The more you know, the less stressful it becomes.
Please note: Westside Nannies is a referral agency and is not a tax professional or legal advisor. All tax-related figures in this article reflect 2025 tax year rules and are sourced from official government publications. For advice specific to your situation and tax advice, please consult a qualified tax professional.
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