If you pay a nanny, housekeeper, in-home caregiver, or other domestic worker $3,000 or more in cash wages during 2026, you owe FICA taxes for that household employee. FICA is the combined Social Security and Medicare tax, and it runs 15.3 percent of cash wages, split evenly between you and the worker. You calculate and report it on Schedule H, which attaches to your personal Form 1040 for the year.
The rule turns on control, not job title. If you set the hours, direct the tasks, and supply the equipment, the person working in your home is your employee for federal tax purposes, whether the arrangement is full-time, part-time, or something you’ve been calling freelance.
Who Counts as a Household Employee
The IRS asks a single question: do you control the details of how the work gets done? Setting a schedule, prioritizing tasks, and providing supplies all point to an employment relationship. What you called the arrangement on paper does not change the answer.
Agency workers can fall on either side of the line. When the agency pays the worker, sets the schedule, and provides tools, the agency is the employer and handles the taxes. If you found someone through an agency but then control how the job is done day to day, you’re the employer no matter how the introduction happened.
Wages Paid to Family Members
Some family wages are carved out of FICA entirely. You do not owe Social Security or Medicare tax on wages paid to your spouse, your child under age 21, or your parent for domestic work in your home, even when those wages go well past $3,000.
The parent exemption has a narrow exception. If your parent is caring for your child who is either under 18 or has a physical or mental condition requiring adult supervision, that care lasts at least four continuous weeks in the quarter, and you are divorced, widowed, or living with a spouse whose own condition prevents them from caring for the child, then your parent’s wages do count for FICA.
The 2026 Threshold and Rates
The $3,000 threshold applies per employee, per calendar year. The moment any single worker crosses that line in 2026 cash wages, FICA is owed on everything you paid them that year, including the first $3,000. Cash wages include check and money order payments. The value of meals, lodging, or clothing you provide doesn’t count toward the threshold and isn’t subject to FICA.
The 15.3 percent combined rate breaks down like this:
- Social Security is 6.2 percent from the employee and 6.2 percent from you, on cash wages up to $184,500 in 2026.
- Medicare is 1.45 percent from each side, with no wage cap.
You have a choice on the employee’s 7.65 percent share. You can withhold it from each paycheck, or you can pay the whole 15.3 percent yourself. If you cover the worker’s share, that amount is taxable income to them for federal income tax purposes, but it does not increase the wages used to compute Social Security or Medicare.
Additional Medicare Tax
An extra 0.9 percent Additional Medicare Tax applies once a single household employee’s cash wages from you cross $200,000 in the calendar year. It’s rare in domestic work, but if it hits, the tax falls entirely on the employee. Begin withholding it in the pay period that pushes wages past $200,000 and continue through year-end. There is no employer match on this surtax.
What to Have in Place Before the First Paycheck
A few pieces of paperwork have to be ready before you run payroll. None are difficult on their own, and skipping any of them creates problems that surface at tax time.
- An Employer Identification Number. Apply on Form SS-4 or through the IRS online application. The EIN identifies you on every filing tied to your household employee.
- Your employee’s Social Security number. The name and number must match Social Security Administration records exactly so the wages credit to the right benefits history.
- Form I-9. Federal law requires you to verify employment eligibility for every hire. This is separate from FICA but is not optional.
- Form W-4, if the worker wants federal income tax withheld from their pay. You aren’t required to withhold income tax from a household employee, but if the employee asks and you agree, the W-4 is how they tell you what to withhold.
Paying Through the Year and Filing Schedule H
Schedule H is where household employment taxes come together. You report total cash wages, calculate the Social Security and Medicare amounts for both shares, and figure any federal unemployment tax owed. Wages from every household worker you had during the year go on the same Schedule H. The form attaches to your Form 1040, and the taxes it produces roll into your total tax liability for the year.
This is where household employers get caught out. The bill can be large if nothing was set aside during the year. Two approaches keep April from becoming painful. You can raise the federal income tax withholding at your own day job by giving your employer a revised W-4. Or you can send quarterly estimated payments using Form 1040-ES, paying electronically through IRS Direct Pay, EFTPS, or by debit or credit card. If you also run a business, you can fold the household taxes into your regular business tax deposits and report them on the corresponding business payroll forms instead of Schedule H.
W-2 and Recordkeeping After Year End
By February 1, 2027, give each household employee a completed Form W-2 for any wages subject to FICA or from which you withheld income tax during 2026. File Copy A of the W-2, along with transmittal Form W-3, with the Social Security Administration by that same date. If an employee leaves mid-year and asks for the W-2 early, provide it within 30 days of the request or 30 days after the final wage payment, whichever is later.
Hold your employment tax records for at least four years after you file the return for the year. That means pay records, copies of Schedule H, the employee’s W-4, the I-9, and anything documenting wages paid and taxes withheld. If the IRS questions a filing later and the records are gone, there’s nothing to fall back on.
Penalties for Missing the Rules
The IRS treats household employment tax the same as any other tax debt, and the penalties add up quickly.
- Filing late. If Schedule H isn’t in by the return due date, the failure-to-file penalty is 5 percent of the unpaid tax for each month or partial month it’s late, up to 25 percent.
- Paying late. A separate 0.5 percent per month failure-to-pay penalty runs on any unpaid balance until it’s cleared.
- W-2 problems. Filing a W-2 with the SSA up to 30 days late costs $60 per form. Between 31 days late and August 1, it rises to $130. After August 1 or never filed, it’s $340. Intentional disregard is $680.
- Interest. Underpayments accrue interest, compounded daily, at a rate that adjusts quarterly. For the first half of 2026, the underpayment rate runs 6 to 7 percent annually.
Not knowing about the nanny tax is the most common reason people end up owing it, and the IRS does not treat that as reasonable cause.
Taxes That Sit Next to FICA
FICA is not the only tax attached to a household employee. Federal unemployment tax (FUTA) has its own trigger: total cash wages of $1,000 or more to household employees in any calendar quarter of 2025 or 2026 makes you liable for FUTA on the first $7,000 of cash wages paid to each employee in 2026. FUTA comes entirely out of your pocket. The standard rate is 6.0 percent, and paying your state unemployment contributions on time earns a credit of up to 5.4 percent, dropping the effective rate to 0.6 percent.
Most states also require household employers to carry state unemployment insurance, and roughly half require workers’ compensation for domestic employees once weekly hours cross a threshold that varies by state. Some states additionally impose disability insurance or paid family leave withholding on household wages. Because state rules vary widely and change often, contact your state labor or workforce agency early in the hiring process to find out exactly what applies.