Au Pair Tax Rules: FICA, Schedule H, and Host Family Credits

Au pair tax rules treat the host family as a household employer and the au pair as a household employee, which means the family owes some employer taxes and paperwork while the au pair almost always owes federal income tax on the weekly stipend. Most J-1 au pairs are exempt from Social Security and Medicare tax during their program, and the family is not required to withhold federal income tax from their pay. But the family still needs an employer identification number, still files Schedule H with their Form 1040, and still issues a W-2. The au pair, in turn, files Form 1040-NR and generally pays the tax themselves, either through voluntary withholding or quarterly estimated payments.

Why the Au Pair Is a Household Employee

The IRS classifies an au pair as a household employee because the host family controls how, when, and where the childcare gets done.¹ The family sets the schedule, chooses the duties, and the work happens inside the family’s home. That level of control defines employment, regardless of whether an agency did the placement.²

The practical consequence: families cannot treat the stipend as a gift, a room-and-board reimbursement, or an independent contractor fee. It is wages, and the family is the employer.²

Social Security and Medicare (FICA)

Most au pairs arrive as nonresident aliens on J-1 visas, and their wages are exempt from Social Security and Medicare tax while they hold that status.³ The exemption covers work performed to carry out the purpose of the J-1 program itself.⁴ While the exemption applies, the family withholds no 6.2% Social Security tax and no 1.45% Medicare tax, and pays no employer match.⁵

The nonresident window generally lasts two calendar years. Au pairs count as “exempt individuals” for the substantial presence test, so they can exclude their U.S. days for up to two calendar years within a six-year window.⁶ Because standard programs run one year with one possible extension, most au pairs leave before that window closes and never owe FICA.

If an au pair stays into a third calendar year and crosses the 183-day substantial presence threshold, they become a resident alien for tax purposes.⁷ From that point, the family must withhold the combined 7.65% FICA rate and pay the matching 7.65%.⁵ Even then, FICA only applies if you pay $3,000 or more in cash wages during the calendar year.⁸ At the standard weekly stipend of roughly $195.75, a full program year clears that threshold easily.

Federal Income Tax: Withholding Is Optional

Because au pair wages are paid for domestic service in a private home, the family is not required to withhold federal income tax.² Withholding happens only if both sides agree to it.⁸

To set up voluntary withholding, the au pair gives the family a completed Form W-4 and a written statement asking for a specific amount to be withheld each week.² Either party can end the arrangement in writing. Any amounts withheld are reported and paid through Schedule H.

Withholding or not, the au pair still owes income tax on the wages. Voluntary withholding just spreads the bill across the year instead of leaving a lump sum at filing time.

The Au Pair’s Own Tax Return

Most au pairs file Form 1040-NR, the nonresident alien return, to report their wages. The IRS recommends either arranging voluntary withholding with the host family or making quarterly estimated payments using Form 1040-ES(NR).²

Estimated payments matter because nonresident aliens generally cannot claim the standard deduction.² An au pair earning $195.75 a week takes in roughly $10,179 for the year, and without the standard deduction, most of that income is taxable. The tax bill lands squarely on the au pair, and it is worth flagging early in the program.

What Counts as Wages

The weekly cash stipend is clearly wages. Room and board are not: meals and lodging provided at the family’s home for the employer’s convenience are excluded from gross income.⁸ Live-in childcare fits that description in almost every case, so the bedroom and meals do not appear on the W-2.

The $500 education stipend is less clear. The IRS describes it as part of the program but does not carve it out as a separate non-taxable benefit.² Because the full stipend is treated as wages, the safest default is to include the education amount as taxable unless a tax professional says otherwise for your specific facts.

Federal Unemployment Tax

If you pay $1,000 or more in cash wages to household employees in any single calendar quarter, you owe federal unemployment tax.⁹ At the standard au pair stipend, you cross that line during the first quarter. FUTA is an employer-only cost; nothing comes out of the au pair’s pay.

The rate is 6% on the first $7,000 of wages, but most employers get a 5.4% credit for state unemployment taxes, leaving a net federal rate of 0.6%.¹⁰ That works out to about $42 a year on $7,000 in wages. Some states with outstanding federal unemployment loans have a reduced credit, so check whether yours is affected. A parallel FUTA exemption exists for nonresident J-1 visa holders performing program-related work, so families hosting a long-term au pair who has become a resident alien should confirm the analysis with a tax professional.

Setting Up as a Household Employer

You need an EIN to file Schedule H. Apply online through the IRS or submit Form SS-4 by fax or mail; the online application issues an EIN immediately.¹¹ Do this before your au pair arrives so you are not scrambling at tax time.¹²

The au pair needs a taxpayer ID number, either a Social Security Number from the SSA or, if an SSN is unavailable, an ITIN obtained by filing Form W-7.¹³ You need that number to complete the W-2 at year-end.

Filing Schedule H and the W-2

Schedule H attaches to your Form 1040, and any household employment taxes flow into your overall tax liability. Voluntarily withheld income tax gets reported there too.¹²

You also issue Form W-2 to the au pair. The general deadline is January 31 after the tax year, shifting to the next business day when January 31 falls on a weekend.¹⁴ For the 2026 tax year, the deadline is February 1, 2027.¹⁵ Total cash wages go in Box 1, any withheld income tax in Box 2, and Social Security wages and taxes in Boxes 3 and 4 only if FICA applied. Copy A goes to the Social Security Administration on paper or through the SSA’s Business Services Online portal.

Childcare Tax Benefits for Host Families

The Child and Dependent Care Credit lets you claim a percentage of qualifying childcare expenses paid so you and your spouse could work or look for work.¹⁶ The maximum qualifying expenses are $3,000 for one child under 13 and $6,000 for two or more.¹⁷ You claim it on Form 2441, which asks for the au pair’s name, address, and SSN or ITIN.

Only the childcare portion of what you spend counts. The IRS excludes food, lodging, clothing, education, and entertainment from qualifying care expenses, so in practice the qualifying amount is the cash stipend paid for childcare hours.¹⁶

If your employer offers a dependent care flexible spending account, au pair wages generally qualify. You can exclude up to $5,000 per year through such a plan ($2,500 if married filing separately).¹⁷ Expenses reimbursed through the FSA reduce the amount eligible for the credit, so you cannot claim both on the same dollars.

Penalties for Late or Missing Filings

The IRS charges per-return penalties for information returns filed late or incorrectly:¹⁸

Up to 30 days late: $60 per return
31 days late through August 1: $130 per return
After August 1, or not filed: $340 per return
Intentional disregard: $680 per return, with no cap

Interest accrues on unpaid penalties.¹⁸ Penalties apply separately for failing to file with the SSA and for failing to furnish the W-2 to the au pair, so a single missed W-2 can trigger two tracks.

Records to Keep

Keep employment tax records for at least four years after the later of the return due date or the date you actually paid the tax.⁸ That covers W-2 copies, Schedule H, any Form W-4 the au pair signed, records of each weekly payment, and any voluntary withholding documentation. If you claimed the Child and Dependent Care Credit, keep the receipts and Form 2441 the same length of time.

A running spreadsheet of date paid, amount, and any tax withheld each week gives you everything you need for Schedule H and the W-2 without reconstructing the year from memory.¹⁹

1
Internal Revenue Service. Hiring Household Employees
2
Internal Revenue Service. Au Pairs
3
Office of the Law Revision Counsel. 26 USC 3121 – Definitions
4
eCFR. 26 CFR 31.3121(b)(19)-1 – Services of Certain Nonresident Aliens
5
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
6
Office of the Law Revision Counsel. 26 USC 7701 – Definitions
7
Internal Revenue Service. Taxation of Alien Individuals by Immigration Status – J-1
8
Internal Revenue Service. Publication 926 – Household Employer’s Tax Guide
9
Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
10
Internal Revenue Service. FUTA Credit Reduction
11
Internal Revenue Service. About Form SS-4, Application for Employer Identification Number
12
Internal Revenue Service. Instructions for Schedule H
13
Internal Revenue Service. About Form W-7, Application for IRS Individual Taxpayer Identification Number
14
Social Security Administration. Deadline Dates to File W-2s
15
Internal Revenue Service. General Instructions for Forms W-2 and W-3
16
Internal Revenue Service. Child and Dependent Care Credit Information
17
Internal Revenue Service. Instructions for Form 2441
18
Internal Revenue Service. Information Return Penalties
19
Internal Revenue Service. How Long Should I Keep Records