The True Cost of a Nanny: Budgeting for Taxes
Budgeting Beyond the Hourly Rate
When you agree to pay a nanny $30/hour, your actual cost is higher. You need to budget for the "Employer Tax Burden."
The Breakdown
- Social Security & Medicare (FICA): You must pay 7.65% of gross wages (employer portion).
- Federal Unemployment (FUTA): 6% on the first $7,000 of wages (often reduced to 0.6% if state taxes are paid on time).
- State Unemployment (SUI): Varies by state. In Washington, it ranges from 0.27% to 6% depending on your industry rating (households usually start low).
The "Nanny Tax" Estimate
A safe rule of thumb is to budget 10-12% above the gross salary for employer taxes.
- Gross Pay: $60,000 / year
- Employer Taxes: ~$6,000 - $7,000 / year
- Total Cost: ~$67,000 / year
Don't let this surprise you at tax time. Use a payroll service (like Kindred) to withhold and pay these quarterly.