Household Employee Tax: Thresholds, Rates, and Filing Steps

If you pay someone $3,000 or more in cash wages during 2026 to work in your home, you owe household employee taxes: Social Security and Medicare on those wages, reported to the IRS on Schedule H with your personal Form 1040.¹ Federal unemployment tax has its own, lower trigger. These rules apply even if you have never run a business. Hiring a nanny, housekeeper, or home health aide makes you an employer under federal tax law, and getting the setup right early is much cheaper than fixing it later.

Who Counts as a Household Employee

The IRS draws the line based on control. If you decide when the work happens, how it gets done, and what tools or supplies are used, the worker is your employee. A housekeeper who follows your cleaning schedule, a nanny who watches your children during set hours, a private cook preparing meals you choose — all employees. Gardeners, personal assistants, and home health aides fit the same pattern when you direct their daily work.

Independent contractors look different. They typically serve multiple clients, bring their own equipment, and set their own methods and schedules. A landscaping company that sends a crew on its own timeline is a contractor. A gardener you tell to mow every Tuesday at 9 a.m. using your mower is an employee. The distinction matters: misclassifying an employee as a contractor can trigger back taxes, interest, and penalties on every dollar you should have withheld.

The Two Thresholds That Trigger Taxes

Two separate dollar figures decide what you owe.

Social Security and Medicare: pay any single household employee $3,000 or more in cash wages during 2026, and you must withhold and pay Social Security and Medicare taxes on those wages.¹
Federal unemployment (FUTA): if total cash wages to all household employees combined reach $1,000 or more in any single calendar quarter, the first $7,000 of wages paid to each employee that year becomes subject to FUTA.¹

Cash wages include bonuses and any money paid in place of salary for transportation or housing. Non-cash compensation like meals or clothing provided in the household does not count toward the $3,000 threshold. Track wages from the first day of hire. Once you cross either threshold, the obligation is locked in.

The Rates You Actually Pay

Social Security tax totals 12.4% of cash wages, split evenly: you pay 6.2% and withhold 6.2% from the employee. Medicare adds 2.9%, again split 1.45% each.² For 2026, Social Security tax applies only to the first $184,500 of wages; anything above is exempt from the Social Security portion, though Medicare has no cap.³

FUTA is yours alone. You don’t withhold any of it from the employee. The statutory rate is 6% on the first $7,000 of wages per employee,⁴ but a credit of up to 5.4% applies when you also contribute to your state’s unemployment insurance fund, which drops the effective rate to 0.6%.⁵ At that effective rate, the maximum annual FUTA cost per employee is $42.

Skipping withholding doesn’t erase the tax. If you don’t withhold the employee’s share of Social Security and Medicare from each paycheck, you become liable for the full amount yourself at year-end. Most household employers find it simpler to withhold each pay period.

Wages Paid to Family Members

Hiring a relative for household work often falls outside these rules. Wages you pay to your spouse, your child under age 21, or your parent are generally exempt from Social Security and Medicare taxes regardless of amount.¹ All three of those relatives are also exempt from FUTA.

The parent exemption has one exception you should know about. If your parent is caring for your child who is under 18 (or who has a condition requiring adult care for 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 wages you pay your parent are subject to Social Security and Medicare taxes.¹ In that situation your parent is functioning as a childcare provider.

Minimum Wage and Overtime

Household employees are covered by the Fair Labor Standards Act. You owe at least the federal minimum wage of $7.25 per hour for every hour worked, and time-and-a-half for hours over 40 in a workweek.⁶ Many states set a higher minimum, and you owe whichever is greater.

Live-in employees are the main exception. Workers who actually reside in your household are exempt from federal overtime, though you still owe minimum wage for all hours worked. For a live-in arrangement, you and the employee can agree in writing to exclude sleeping time, meal breaks, and other periods of complete freedom from duty when calculating hours worked. If those free periods keep getting interrupted by calls to duty, the agreement has to be renegotiated to match actual hours.⁷

Setup Before the First Paycheck

Apply for an Employer Identification Number using IRS Form SS-4. This nine-digit number identifies you as an employer for tax purposes even though you don’t run a traditional business.⁸ Each employee must complete Form I-9 to verify authorization to work in the United States, which requires presenting identity and work-authorization documents.⁹

Federal income tax withholding is optional for household employees. You aren’t required to withhold it, but if the employee asks and you agree, get a completed Form W-4 specifying the amount.¹⁰ Many employees prefer this, since it spares them a lump-sum bill at filing time.

Most states also require you to register for a state unemployment insurance account and get a state tax identification number. The registration trigger is usually much lower than the federal $1,000-per-quarter FUTA threshold. Some states require it once quarterly wages reach a few hundred dollars. Check with your state’s labor department early, because missing a state registration deadline creates its own penalties.

How and When You File

Report household employment taxes by attaching Schedule H to your personal Form 1040.¹¹ Schedule H totals your Social Security, Medicare, FUTA, and any federal income tax you withheld, then rolls that amount into your overall tax bill. If you don’t otherwise need to file a return, you must file Schedule H by itself when you owe household employment taxes.¹² The filing deadline is April 15.

Here’s the trap: household taxes are due with your annual return, not quarterly, but the IRS still expects payment throughout the year if your combined income tax and household employment tax liability tops $1,000.¹³ You have two practical ways to avoid an underpayment penalty:

Adjust withholding at your own job. Submit a new Form W-4 to your employer asking for extra withholding from each paycheck. The additional withholding covers your household tax bill without separate payments.¹
Make estimated tax payments using Form 1040-ES through the Electronic Federal Tax Payment System. For 2026, payments are due April 15, June 15, and September 15 of 2026, and January 15, 2027.¹⁴

If you have no wages or pension income to increase withholding from, and your income tax liability (excluding household employment taxes) wouldn’t normally require estimated payments, you won’t face an underpayment penalty.¹

W-2 and Recordkeeping

After the tax year ends, furnish Form W-2 to each employee by February 1 of the following year, showing total wages and all taxes withheld.¹⁵ Keep all employment tax records — pay stubs, time records, tax forms — for at least four years after the return’s due date or the date the taxes were paid, whichever is later.¹ Separately, the Department of Labor requires you to keep wage and hour records (time cards, schedules, pay computations) for at least three years under the FLSA.¹⁶

Penalties for Getting It Wrong

Two IRS penalties stack. The failure-to-file penalty runs 5% of the unpaid tax for each month (or partial month) a return is late, capping at 25%.¹⁷ The failure-to-pay penalty adds another 0.5% per month on tax that stays unpaid after the due date, also capping at 25%.¹⁸ Interest accrues on top of both.

Willful failure is the bigger risk. If the IRS finds you knowingly skipped your withholding obligations, it can assess a penalty equal to 100% of the unpaid trust fund taxes — the full employee share of Social Security and Medicare that should have been withheld. This is where household employers who pay workers “under the table” for years land in serious trouble. The IRS pursues these amounts against you personally.

State Obligations Are Separate

Federal taxes are only part of the picture. Most states impose their own unemployment insurance tax on household employers, usually triggered at a lower wage threshold than the federal $1,000-per-quarter standard. New employers generally pay a default rate, commonly between 2.7% and 4.1%, until enough payment history builds up for the state to assign an experience-based rate.

Some states also require withholding for state disability insurance or paid family leave. The rates are relatively small, generally under 1.5% of wages, but missing them creates compliance gaps that compound.

Workers’ compensation rules for household employees vary widely. Some states exempt domestic workers entirely; others require coverage once a worker exceeds a certain number of weekly hours or a wage threshold. Contact your state’s labor department or workers’ compensation board to confirm what applies. Even where coverage isn’t legally required, carrying it can protect you from personal liability if the employee is injured on the job.

1
Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
2
Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
3
Social Security Administration. Contribution and Benefit Base
4
Office of the Law Revision Counsel. 26 USC 3301 – Rate of Tax
5
Office of the Law Revision Counsel. 26 USC 3302 – Credits Against Tax
6
U.S. Department of Labor. Fact Sheet 79D – Hours Worked Applicable to Domestic Service Employment Under the Fair Labor Standards Act
7
eCFR. 29 CFR 552.102 – Live-in Domestic Service Employees
8
Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
9
U.S. Citizenship and Immigration Services. I-9, Employment Eligibility Verification
10
Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
11
Internal Revenue Service. About Schedule H (Form 1040), Household Employment Taxes
12
Internal Revenue Service. Instructions for Schedule H (2025)
13
Internal Revenue Service. Estimated Taxes
14
Internal Revenue Service. EFTPS – The Electronic Federal Tax Payment System
15
Internal Revenue Service. General Instructions for Forms W-2 and W-3
16
U.S. Department of Labor. Fact Sheet 79C – Recordkeeping Requirements for Individuals, Families, or Households Who Employ Domestic Service Workers Under the FLSA
17
Internal Revenue Service. Failure to File Penalty
18
Internal Revenue Service. Failure to Pay Penalty