2026-08-18
Can You Pay a Nanny or Relative Through Your Dependent Care FSA?
Yes — a nanny, babysitter, or relative can be paid through your Dependent Care FSA, but paying an individual caregiver (rather than a licensed daycare business) brings two extra requirements that trip people up: getting their taxpayer ID, and potentially becoming a household employer yourself.
You need the caregiver's taxpayer ID
To claim reimbursement, you generally need your caregiver's Social Security Number (or Employer Identification Number if they operate as a business). Get this at the time you hire them — plan administrators will typically deny a claim without it, and it's an awkward conversation to have retroactively.
The relative exception — with a catch
You can generally pay a relative for care, including a grandparent, aunt, uncle, or adult sibling — with one important exception: you cannot pay your spouse, and you cannot pay a person you claim as your tax dependent, or your own child who is under age 19 at the end of the year, even if that child isn't your dependent.
The 2026 “nanny tax” threshold
If you pay any one household employee — a nanny is the classic example, but this also applies to a relative you pay directly, like a grandparent watching a grandchild in your home — $3,000 or more in cash wages during 2026, you become a household employer under IRS rules. That means you're responsible for withholding and paying Social Security and Medicare (FICA) taxes on those wages, and potentially federal unemployment (FUTA) tax if you pay $1,000 or more to household employees in any calendar quarter.
This is separate from, and in addition to, your Dependent Care FSA election — it's a tax obligation tied to being an employer, not to the FSA itself. It applies whether or not you run any of the payments through your FSA.
Does this change what you can claim?
No — crossing the household employer threshold doesn't change what's eligible for FSA reimbursement. It just adds a separate payroll tax responsibility on your end as the employer. Many families use a household payroll service (a “nanny payroll” provider) to handle this rather than doing it manually.
For everything else about what counts as eligible care, see eligible expenses.