Should I Pay My Nanny in Cash?

Mar 27, 2025 | GTM Blog, Household Employer Policies, Household Payroll & Taxes, Tax Season

Thinking about paying your nanny cash? While the idea of skipping taxes and paperwork is tempting, it’s crucial to understand the risks involved. When you hire a nanny, you become an employer, and that comes with tax responsibilities. Paying cash is a major red flag. Read below to learn why paying ‘on the books’ is the only way to go.

Why Paying Cash is A Bad Idea

In 2025, the nanny tax threshold is $2,800, meaning if you pay your nanny more than that during the year, you must withhold state and federal taxes. Paying your nanny cash needlessly complicates the process of withholding the correct amount, and the margin for error is large. You’ll also need to consider pay stub laws, which may require you to provide a pay statement each pay period that details wages, rates, withholdings, and more.

Additionally, choosing to pay your nanny in cash, off the books, directly violates employment laws. This action carries severe risks, including serious fines, which can negatively impact your financial stability.

Benefits of Paying Your Nanny on the Books

Take Advantage of Tax Benefits

Employer taxes for a nanny are likely less than you anticipate. In 2025, childcare tax breaks can save you over $2,000, often covering most of your tax liability. Take advantage of the child and dependent care tax credit especially if you have multiple children under 13. You should also use the Dependent Care FSA.

Use our free nanny tax calculator for a personalized estimate. But remember, these savings are only available if you pay your nanny legally.

Strengthen Your Relationship with your Nanny

Paying cash off the books also hurts your nanny’s future. Without documentation of their work history, it will be very hard for them to qualify for credit, loans, and mortgages, and they’ll lack government assistance, like Social Security and Medicare when they may need it the most. Many of the most sought-after nannies will only work for families who pay on the books.

How to Keep Payroll Simple and Straightforward

The easiest way to ensure that you are following all your responsibilities as an employer is to use a payroll service. With EasyPay® by GTM, we will make sure your nanny gets paid accurately and on time and has the correct amount deducted each pay period for taxes. Paying cash may seem like the easiest route, but the likelihood of something going wrong is just too high. Call us at (800) 929-9213 for a complimentary, no-obligation consultation with a household employment expert, or schedule time with us at your convenience.