Au Pair Taxes for Host Families: FICA, W-2 & FSA Rules (2026)

The au pair program sits in a peculiar corner of U.S. tax law. On paper, your au pair is a young person living in your home and providing childcare. In tax terms, however, she is a J-1 nonresident alien participating in a federal cultural exchange program, which triggers a very specific and largely favorable set of tax rules for host families. Handled correctly, the tax treatment of the au pair program is one of the most attractive parts of the entire arrangement.

This guide walks through the 2026 rules: when and why au pair wages are exempt from FICA and FUTA, whether you need an EIN or a W-2, how the stipend interacts with your Dependent Care FSA and the Child and Dependent Care Credit, what your au pair has to file, and the edge cases where the default treatment changes. It is not a substitute for advice from your CPA, but it will let you walk into that conversation already a step ahead.

Why the Au Pair Tax Treatment Is Different From a Nanny's

A private nanny is, in the eyes of the IRS, a household employee. You owe the employer share of Social Security and Medicare (7.65%), federal unemployment tax (FUTA), state unemployment tax, and, in most cases, you must issue a W-2 and file Schedule H with your personal tax return. For a detailed walk-through of that machinery, see our nanny tax guide.

An au pair sits in a different tax category. Because she is a J-1 nonimmigrant participating in a State Department-designated exchange program, three distinct rules apply at once:

1. Nonresident alien status for FICA purposes. J-1 participants are treated as nonresident aliens for their first two calendar years in the U.S. Nonresident alien employees of qualifying J visa categories are exempt from FICA (Social Security and Medicare) under IRC Section 3121(b)(19).
2. FUTA exemption. Because au pair stipends are treated as nontaxable for FUTA purposes when paid to a J-1 au pair, host families do not owe federal unemployment tax on au pair wages.
3. Income tax still applies. The au pair is still subject to federal (and often state) income tax on the stipend, but the obligation to file belongs to the au pair, not to the host family.

Taken together, these rules eliminate almost all of the employer-side tax machinery that makes a nanny more expensive than her hourly rate suggests. The host family simply pays the weekly au pair stipend in cash (or by direct deposit), and there is no withholding, no matching contribution, no Schedule H, and no W-2.

FICA Exemption in Detail

FICA (the Federal Insurance Contributions Act) is the combined Social Security and Medicare tax, totaling 15.3% of wages split evenly between employer and employee. For a nanny earning $65,000 a year, the employer-side FICA obligation alone is roughly $4,973.

For an au pair, that number is zero. The exemption is specifically created by IRC 3121(b)(19), which excludes from the definition of "wages" any services performed by a nonresident alien temporarily in the U.S. under the J-1 or Q visa categories, as long as the services are carried out to fulfill the purpose for which the alien was admitted. Au pair work clearly qualifies, because childcare in a host family's home is the designated purpose of the J-1 au pair category.

The Two-Year Rule

The FICA exemption is tied to nonresident alien status, which under the substantial presence test is normally triggered after 183 days in any calendar year. However, J-1 participants are "exempt individuals" for substantial-presence counting during their first two calendar years in the U.S. The practical result is that an au pair who arrives in, say, July 2026 and leaves in July 2027 is a nonresident alien for both 2026 and 2027, and all of her stipend is FICA-exempt.

If an au pair extends the program for a second 12-month year, she can still typically maintain nonresident alien status because the "exempt individual" rule covers two calendar years. A small fraction of au pairs who remain in the U.S. into a third calendar year will cross into resident-alien territory under the substantial presence test, at which point the stipend becomes FICA-taxable going forward. This is rare, but if it applies to you, your sponsor agency and a CPA should walk you through the transition.

FUTA Exemption

Federal Unemployment Tax (FUTA) is 0.6% on the first $7,000 of wages for most household employers. Because the IRS has consistently taken the position that au pair stipends are not "wages" for FUTA purposes, host families do not owe FUTA on au pair stipend payments. This is a modest amount ($42 per year), but it matters because it also means you are generally exempt from state unemployment tax (SUTA) on au pair wages in most states, which follow federal wage definitions for SUTA purposes. Check your state rules to be sure; a handful of states apply their own definitions.

Do You Need an EIN?

In most cases, no. An Employer Identification Number is required when you have employees subject to federal payroll tax withholding or when you are issuing a W-2 or 1099. Because the default au pair arrangement involves neither withholding nor a W-2, you do not need an EIN.

You do need an EIN if:

• You voluntarily withhold federal income tax from the stipend at the au pair's request
• You issue a W-2 or a similar information return
• You file Schedule H with your personal return to report household employment taxes
• Your state requires you to register as a household employer for state income-tax withholding

If any of the above applies, obtaining an EIN is free and can be completed online through the IRS website in minutes.

Does the Au Pair Receive a W-2?

Usually not. The conventional approach is that the au pair receives her weekly stipend with no tax withheld and no W-2 issued, and she independently files Form 1040-NR each year to report the income and pay whatever federal and state income tax she owes.

That said, several sponsor agencies now recommend that host families issue a W-2 as a best practice, particularly in states where labor law treats au pairs as employees. A W-2 gives the au pair a clean paper trail for her own tax filing and avoids ambiguity. If you choose this path:

• You apply for an EIN
• You report the weekly stipend in Box 1 (wages, tips, other compensation)
• You leave Boxes 3, 4, 5, and 6 blank or show $0, reflecting the FICA exemption
• You file the W-2 with the SSA and provide copies to the au pair
• You file Schedule H with your 1040 to reconcile household employment taxes (which will be zero, but the form still needs to be filed)

This is a defensible and increasingly common approach, but it is optional rather than required in most jurisdictions. Ask your CPA what they recommend given your state and your risk tolerance.

How the Au Pair Files Her Own Taxes

Your au pair is responsible for filing her own U.S. taxes, typically by April 15 of the year following each calendar year of U.S. residence. She files Form 1040-NR (U.S. Nonresident Alien Income Tax Return) and reports the stipend as wages. Key points to understand as a host family:

• Her federal tax bill on $10,179 of annual stipend is usually modest, in the range of $300-$800 depending on withholding treaties and deductions
• Most sponsor agencies send an annual tax guidance memo in January to every au pair and host family
• Many au pairs use services like Sprintax, which specializes in nonresident alien tax returns
• Some families help their au pair file, either by paying for a tax-preparation service or by connecting them with the family's own accountant
• If the au pair is from a country with a U.S. tax treaty covering scholarship or exchange income, parts of the stipend may be exempt or taxed at a lower rate

The host family is not legally responsible for the au pair's tax return, but because the au pair is a member of your household for a year, it is common and reasonable to offer help.

The Host-Family Side: Dependent Care FSA and the Credit

This is where the au pair program becomes genuinely powerful financially. Because your au pair's stipend, the agency program fee, and the mandatory education allowance are all employment-related expenses paid for the care of a qualifying child under 13, they qualify for two significant federal tax benefits.

Dependent Care FSA

A Dependent Care FSA lets you set aside pre-tax dollars to pay for qualifying childcare. The 2026 household limit is $7,500, up from $5,000 in 2025 under the OBBBA. If both parents work (or are full-time students), a family filing jointly can run up to $7,500 through a Dependent Care FSA and use it to reimburse:

• Every dollar of the au pair's weekly stipend
• The agency program fee
• The $500 education allowance
• Other employment-related childcare expenses (e.g. backup care, summer day camp for the kids)

At a combined federal plus state plus FICA marginal rate of 40%, running $7,500 through a Dependent Care FSA saves roughly $3,000 per year. This essentially means the federal government is subsidizing a meaningful portion of your au pair cost.

Child and Dependent Care Credit (Form 2441)

The Child and Dependent Care Credit allows you to claim a percentage of qualifying care expenses, up to $3,000 for one qualifying child or $6,000 for two or more children. The credit percentage ranges from 20% to 35% depending on adjusted gross income. For most Beverly member families at the $200K+ HHI mark, the percentage is the floor of 20%, giving a credit of up to $600 for one child or $1,200 for two-plus.

You cannot double-count the same dollars for both the FSA and the credit. The typical optimization is: run the full $7,500 through the FSA first, then claim the credit only on additional qualifying expenses beyond that amount.

Annual Tax Savings Example

Here is what a realistic savings picture looks like for a typical Beverly host family in a high-cost metro:

This calculation excludes state-level dependent care credits, which several states (including California, New York, and Massachusetts) offer on top of the federal credit. Depending on your state, additional savings of $500-$1,500 per year are common.

Dependent Care FSA Administration: The Practical Side

FSAs are funded through payroll deduction and reimbursed against submitted receipts. For the au pair program specifically, a few administrative notes:

• Your FSA administrator will usually accept sponsor agency invoices, program fee receipts, and a weekly-stipend log signed by you and the au pair
• Because the stipend is paid weekly but FSA funds may be disbursed bi-weekly or monthly, a short timing offset is normal
• Some employers require a tax ID for the care provider. In the au pair context, the sponsor agency's EIN typically satisfies the "care provider" identification requirement. If not, your au pair can apply for an ITIN (Individual Taxpayer Identification Number) using Form W-7
• The FSA is use-it-or-lose-it. If your au pair arrives mid-year, right-size your election at the next open enrollment

Beverly helps member families set up this plumbing. We coordinate with your employer's FSA administrator, build the weekly-stipend log template, and make sure the sponsor agency documentation your administrator requires is on file before reimbursement requests go in.

State Tax Considerations

State tax treatment generally follows federal, but with exceptions worth flagging:

• Massachusetts: Following the Capron v. Massachusetts AG ruling, au pairs in Massachusetts are effectively treated as employees for state wage-and-hour purposes. State income-tax filing is required. Some host families register as employers and withhold state income tax voluntarily.
• California: California applies its own wage-and-hour rules to some au pair situations. Consult a California CPA.
• New York: Treats au pairs as household employees for certain benefit-eligibility purposes. State income tax applies to the stipend for the au pair, but host-family obligations are generally minimal.
• States with no income tax (TX, FL, NV, WA, WY, SD, TN, NH, AK): No state-level complications for the au pair or the host family.

Always confirm with a tax advisor licensed in your state, especially if you live in Massachusetts or California.

Record-Keeping Checklist

At tax time, you will want to have the following documented:

• Sponsor agency invoice and payment confirmation for the program fee
• Sponsor agency's tax identification number (EIN)
• Weekly stipend log: date, amount, method of payment
• Receipt or cancelled check for the $500 education allowance
• Proof that the au pair is a qualifying care provider (J-1 visa stamp, DS-2019)
• Any additional qualifying expenses (travel to classes, required supplies)
• A copy of your Dependent Care FSA plan documents and year-end balance statement

Keep these for at least three years after filing, which is the typical IRS audit window.

What Changes If Your Au Pair Extends for a Second Year

Au pair program extensions for a second 12-month term are increasingly common. For tax purposes, the key consideration is whether your au pair remains a nonresident alien during the extension.

Under the J-1 exempt-individual rule, an au pair can continue to count as a nonresident alien for the first two calendar years in the U.S. For a typical extension, this covers the full second year. Only if the au pair remains in the U.S. for a third calendar year does resident-alien status kick in, at which point FICA becomes due on wages paid in that year.

If this situation applies, sponsor agencies will flag it, and you will need to apply for an EIN, begin withholding FICA, and issue a W-2 at year-end. For planning purposes, the vast majority of host families never face this scenario, because programs end before the three-year calendar threshold.

When to Get a CPA Involved

The au pair tax picture is simpler than most host families expect, but several scenarios warrant professional help:

• You live in Massachusetts or California
• You are considering voluntary withholding and W-2 issuance
• Your au pair is extending into a third calendar year
• Your au pair has U.S.-sourced income beyond the stipend (rare, but possible)
• You want to optimize the interaction between the FSA, the Credit, and any employer-side dependent care benefit
• Your household income is in a range where the phase-outs on the Child and Dependent Care Credit matter

Beverly doesn't provide tax advice, but we do keep a shortlist of CPAs who understand the au pair program and can advise on the specific edge cases above. We make introductions as part of our coordination work with member families.