IRS Publication 926 is the agency’s guide to the federal taxes you owe when you hire someone to work in your home. The short version: if you pay a household employee $3,000 or more in cash wages during 2026, you owe Social Security and Medicare taxes on those wages. If you pay $1,000 or more in cash wages to household workers in any calendar quarter of 2025 or 2026, you also owe federal unemployment tax for 2026. You report both on Schedule H and attach it to your personal Form 1040.
These rules apply whether the worker is a nanny, a senior caregiver, a housekeeper, a private chef, or any other domestic help. The dollar amounts and forms are the same.
Is Your Worker Actually a Household Employee?
Everything in Publication 926 starts here, because if the person working in your home is an independent contractor, none of it applies. A household employee is someone whose work you control: you decide what gets done, when, and how. A housekeeper who follows your routine on your schedule is an employee. A landscaper who shows up with their own crew and equipment to deliver a finished result is a contractor.
The IRS looks at three things to make the call: behavioral control (do you direct how the work is performed?), financial control (do you provide tools and reimburse expenses?), and the nature of the relationship (is this ongoing, not a one-off project?). When most of those point toward employment, the worker is your employee for tax purposes.1Internal Revenue Service. Worker Classification 101: Employee or Independent Contractor
Classifying an employee as a contractor to avoid payroll is the costliest mistake in this area. If the IRS reclassifies the worker, you owe the employment taxes you should have been paying all along, plus penalties and interest.1Internal Revenue Service. Worker Classification 101: Employee or Independent Contractor
The 2026 Wage Thresholds
Two separate thresholds decide which taxes you owe. Crossing one does not mean you’ve crossed the other.
Social Security and Medicare: $3,000 Per Employee
If you pay any single household employee $3,000 or more in cash wages during 2026, you owe Social Security and Medicare taxes (FICA) on every dollar of that employee’s wages for the year, not just the dollars above $3,000. The threshold is evaluated per employee.2Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
One exception matters for families with teenage sitters: you do not owe FICA for a household employee under 18 unless household work is their principal occupation. A high school student who babysits on weekends is typically exempt, even if annual pay exceeds the threshold.3Internal Revenue Service. Instructions for Schedule H (2025)
Federal Unemployment Tax: $1,000 Per Quarter
FUTA uses a different test. If you paid $1,000 or more in total cash wages to all household employees combined in any calendar quarter of 2025 or 2026, you owe FUTA tax on wages paid in 2026.2Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide The threshold is a combined total, and the prior-year quarter counts. FUTA applies to the first $7,000 of each employee’s wages and is paid entirely by you.
What “Cash Wages” Means
Both thresholds count cash wages only: checks, money orders, direct deposits, and actual cash. Food, lodging, clothing, and transit passes do not count. But cash you hand over in place of those items does count.2Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
Paperwork Before the First Paycheck
Three documents need to be in place before you run payroll.
Employer Identification Number
You need an EIN to file employment tax returns and issue a W-2. The fastest route is the IRS online application, which assigns the number immediately.4Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees You can also mail or fax Form SS-4.5Internal Revenue Service. About Form SS-4, Application for Employer Identification Number Your personal Social Security number is not a substitute.
Form I-9
Federal law requires you to verify that your new employee is authorized to work in the United States. The employee completes their section and shows you identity and work-authorization documents, which you examine and record on Form I-9. The verification has to be done within three business days of the first day of work. If the job itself lasts fewer than three days, finish the form on day one.6U.S. Citizenship and Immigration Services. Instructions for Form I-9, Employment Eligibility Verification
There is one narrow carve-out: Form I-9 is not required for casual domestic work performed in a private home on a sporadic, irregular, or intermittent basis.7U.S. Citizenship and Immigration Services. Handbook for Employers M-274 – 2.0 Who Must Complete Form I-9 An occasional babysitter may qualify; a regularly scheduled nanny does not.
Form W-4
Have your employee fill out Form W-4.8Internal Revenue Service. Topic No. 753, Form W-4, Employees Withholding Certificate Here household employment splits from regular jobs: federal income tax withholding is optional. You only have to withhold if the employee asks you to on the W-4. It’s usually a good idea anyway, because without withholding your employee can face a surprise bill in April.
Both the I-9 and the W-4 stay in your files. Neither is sent to the IRS.
Calculating What You Owe
FICA: 15.3%, Split Between You and the Employee
The combined Social Security and Medicare rate is 15.3% of cash wages. You and the employee each pay half: 7.65% apiece, made up of 6.2% for Social Security and 1.45% for Medicare on each side.9Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates You withhold the employee’s share from each paycheck and remit the full 15.3% to the IRS. You can instead pay the employee’s share from your own funds, but that extra amount counts as additional taxable wages to them.
The Social Security piece applies only to wages up to $184,500 in 2026. Wages above that cap are still subject to the 1.45% Medicare tax, which has no ceiling.10Social Security Administration. Contribution and Benefit Base An Additional Medicare Tax of 0.9% applies to the employee’s wages above $200,000 in a year. You begin withholding that extra 0.9% once pay crosses $200,000, and there is no employer match on it.11Internal Revenue Service. Topic No. 560, Additional Medicare Tax
FUTA: 6% on the First $7,000, Usually Reduced to 0.6%
FUTA is 6.0% on the first $7,000 in cash wages per employee for the year.12Internal Revenue Service. Topic No. 759, Form 940 – FUTA Tax Return Filing and Deposit Requirements If you pay your state unemployment taxes on time and in full, you get a credit of up to 5.4%, dropping the effective federal rate to 0.6%, or a maximum of $42 per employee for the year. FUTA is never withheld from the employee’s pay. The 5.4% credit can be trimmed if your state has outstanding federal unemployment loans; the IRS publishes a list of credit-reduction states each November.
Federal Income Tax
If the employee asked for income tax withholding on the W-4, calculate the amount using the IRS withholding tables for the current year and remit it with your other employment taxes. If they did not ask, you have no obligation to withhold.
Paying Through the Year
Household employers generally do not use the Electronic Federal Tax Payment System the way businesses do. You roll the liability into your personal income tax payments one of two ways:
- Increase your quarterly estimated tax payments using Form 1040-ES. For 2026, those payments are due April 15, June 16, September 15, and January 15, 2027.13Internal Revenue Service. Publication 509 (2026), Tax Calendars
- If you have a regular job, file a new W-4 with your own employer to withhold extra income tax from your paychecks. The extra withholding offsets what you’ll owe at year-end.
If your household employment tax is small, you can pay it all when you file your 1040, provided the amount doesn’t push you into underpayment-penalty territory. For most families, spreading the payments is safer.
Year-End Forms
W-2 and W-3
Give your employee a Form W-2 showing total wages and all amounts withheld for Social Security, Medicare, and federal income tax. The employee’s copy is due by January 31 after the tax year. You also file Copy A of the W-2 with Form W-3 (Transmittal of Wage and Tax Statements) to the Social Security Administration. For the 2026 tax year, the SSA deadline is February 1, 2027, because January 31 falls on a Saturday.14Internal Revenue Service. Publication 926 – Household Employer’s Tax Guide The SSA uses this to credit your employee’s earnings toward future Social Security benefits.
Schedule H
Schedule H reconciles your full household employment tax liability for the year. It is not a standalone return. You attach it to your personal Form 1040.15Internal Revenue Service. About Schedule H (Form 1040) – Household Employment Taxes The form steps through both FICA shares, FUTA, and any federal income tax you withheld, and the total flows into the “Other Taxes” line of your 1040. Your estimated payments or extra W-4 withholding get credited against that liability. Schedule H is due with your 1040, typically April 15. The failure-to-file penalty runs 5% of the unpaid tax for each month or partial month the return is late.16Internal Revenue Service. Failure to File Penalty
Credits That Offset the Cost
Two federal tax benefits can take a bite out of what you spend on a nanny or caregiver.
Child and Dependent Care Credit
If you pay a household employee to care for a child under 13 or a dependent who can’t care for themselves, you may qualify for the Child and Dependent Care Credit. It’s based on up to $3,000 of qualifying expenses for one dependent, or $6,000 for two or more.17Internal Revenue Service. Topic No. 602, Child and Dependent Care Credit Both you and your spouse, if filing jointly, must have earned income, and the credit is generally unavailable to married couples filing separately. The care provider cannot be your spouse, the child’s parent (if the child is under 13), your own child under 19, or anyone you claim as a dependent. You report the provider’s name, address, and taxpayer identification number on Form 2441.
Dependent Care FSA
If your own employer offers a Dependent Care Flexible Spending Account, you can use pre-tax dollars to pay a nanny or caregiver for qualifying expenses. Dependent care benefits excluded from your income have to be subtracted before you calculate the Child and Dependent Care Credit, so the same dollars can’t be used twice. For higher-income families the FSA usually saves more, because the credit percentage phases down as income rises.
State Obligations Publication 926 Doesn’t Cover
Publication 926 is a federal guide. The IRS itself tells household employers to contact their state unemployment agency for guidance on state rules.2Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide Three state-level items to check:
- State unemployment insurance (SUTA). Most states require household employers to pay in, with thresholds and taxable wage bases that vary widely. You may owe both federal FUTA and state unemployment, or in some situations only one.
- State income tax withholding. In states with an income tax, you may need to withhold from the employee’s wages. Some states mirror the federal optional rule for household employers; others require it.
- Workers’ compensation. Many states require household employers to carry coverage once a domestic worker exceeds a certain number of hours per week or a wage threshold. Rules range from coverage on the first hour worked to exemptions for part-time household staff. The state workers’ compensation board is the authoritative source.
What to Keep, and for How Long
Keep all employment tax records for at least four years after the return for those taxes is filed.18Internal Revenue Service. Employment Tax Recordkeeping That includes pay stubs, your copies of W-2s, Schedule H worksheets, and any backup for your calculations. A simple payroll log with payment date, gross wages, amounts withheld, and net pay is enough.
Form I-9 has its own retention rule. Keep it for three years from the hire date or one year after employment ends, whichever is later.19U.S. Citizenship and Immigration Services. Retention and Storage For a long-term nanny, that means the whole period of employment plus one more year. These files contain Social Security numbers and other sensitive data, so store them securely.