Can I use a dependent care FSA or the child care credit for a nanny?
Updated November 6, 2026 · For 2026 · General information, not tax or legal advice
Yes to both, and for most families this is what makes paying a nanny legally cheaper than paying under the table. Both breaks require a caregiver whose name and Social Security number you report, so they only work with a nanny on payroll.
Dependent care FSA
If your employer offers a dependent care flexible spending account, you can set aside up to $7,500 in 2026 before income and payroll taxes to reimburse nanny wages for care of a child under 13 (or a dependent who cannot care for themselves) so you can work. Both spouses must be working, looking for work or in school full-time.
The saving is your marginal income tax rate plus 7.65% payroll tax on the amount. For a family in the 24% bracket that is roughly $2,370 a year, more with state income tax. You submit the nanny's wages as the expense, usually with a signed statement from the nanny or pay stubs.
Elect during open enrollment or within 30 days of hiring a nanny, which counts as a qualifying life event under most plans. The money is use-it-or-lose-it within the plan year.
Child and dependent care credit
Claimed on Form 2441 with your 1040. For 2026 the credit is between 20% and 50% of up to $3,000 of care expenses for one child or $6,000 for two or more, with the percentage falling as income rises. Nanny wages count, and so does the employer tax you paid on them.
If you use an FSA, the dollars reimbursed through the FSA are subtracted from the $3,000 or $6,000 cap first. A family with two children and a $7,500 FSA has no credit left; a family with one child and a $7,500 FSA has none either. Families without an FSA, or with lower FSA elections, take the credit on the rest.
What you need from your nanny
Their name, address and Social Security number for Form 2441, and wage records. A W-2 you issued is the cleanest evidence. This is also why the IRS can easily match an unreported nanny: Form 2441 names them.
How it nets out
For a $50,000-a-year nanny, employer taxes run about $5,000. A $7,500 FSA saves a 24%-bracket family about $2,400; a credit on $6,000 saves at least $1,200. Legal payroll typically costs the family $1,500 to $3,000 a year net, often less. Run your figures in the calculator.
Frequently asked
What is the dependent care FSA limit for 2026?
$7,500 per household for 2026 ($3,750 if married filing separately), up from $5,000 in prior years. Your employer must offer the plan and you elect during open enrollment.
Can I claim both the FSA and the credit?
Yes, but not on the same dollars. Expenses reimbursed by the FSA reduce the expenses eligible for the credit, which is capped at $3,000 for one child or $6,000 for two or more.
What information does the nanny have to give me?
Their name, address and Social Security number, which you report on Form 2441. A nanny you pay off the books cannot be claimed.
Pay your nanny legally for $14.99/month
Hours, paychecks with every federal and state tax computed, pay stubs, PTO, and a filing calendar with the figures pre-filled. 14-day free trial, no card needed.