Taxes for Household Employees: Thresholds, Schedule H, and Filing

If you pay someone to work in your home, taxes for household employees kick in at two thresholds. Once you pay a worker $3,000 or more in cash wages during 2026, you owe Social Security and Medicare taxes on those wages. Separately, if you pay $1,000 or more in cash wages to all your household workers combined in any calendar quarter of 2025 or 2026, you owe federal unemployment tax. Both get reported once a year on Schedule H, which you attach to your personal Form 1040.

Who the Rules Apply To

The IRS uses a control test to decide who is a household employee. If you set what work gets done and how it gets done, the worker is your employee, even if you don’t direct every task day to day.¹ Hours, pay method, and how you found the person don’t change that.

Nannies, housekeepers, private nurses, home health aides, cooks, yard workers, and drivers commonly fall into this category.² Someone who runs a business open to the public and controls their own methods, like a plumber you call for a repair or a landscaping company that sends a crew, is an independent contractor. You don’t owe household employment taxes on payments to contractors.

Workers Who Don’t Trigger the Tax

Some workers are exempt from Social Security and Medicare taxes no matter how much you pay them. Getting this wrong in either direction is common, whether that means overpaying on a weekend babysitter or underpaying on a full-time caregiver.

Your spouse’s wages for household work are not subject to FICA.
Your child under 21 is exempt.
Your parent is generally exempt. The exception: you must pay FICA on a parent’s wages if that parent cares for your child under 18 (or a child who needs adult care because of a condition), and you are divorced and not remarried, widowed, or living with a spouse who can’t physically or mentally care for the child.
Any worker under 18 is exempt unless household work is their principal occupation. A high school student who babysits doesn’t count. A 17-year-old working full time as a nanny does.

These carve-outs apply specifically to Social Security and Medicare.³ FUTA has its own family-member exclusions that closely track this list.⁴

What Counts Toward the $3,000 Threshold

Cash wages means what you pay in currency, by check, or by money order. It does not include the value of meals, lodging, clothing, or transit passes you provide.³ A live-in nanny who eats at your table and sleeps in a spare bedroom does not accrue wages from the food or the room. Cash you hand the nanny to buy their own meals, on the other hand, counts.

This matters most when a worker lives in your home, where non-cash compensation can be substantial. Providing room and board doesn’t push you over the threshold; only cash paid does.

Social Security and Medicare Taxes

Once cash wages reach $3,000, FICA applies to every dollar of cash wages you’ve paid that worker, not just the amount over the threshold.⁵ The combined rate is 15.3%, split equally between you and the employee.

Social Security is 6.2% from the employee and 6.2% from you, on wages up to $184,500 in 2026.⁶
Medicare is 1.45% from the employee and 1.45% from you, with no wage cap.³
Additional Medicare Tax of 0.9% must be withheld from any wages above $200,000 you pay a single employee in a year. You do not owe a matching share.³

You can withhold the employee’s 7.65% share from each paycheck or pay it yourself. If you cover it, the IRS treats that amount as additional taxable income to the worker, which means FICA is owed on that too.⁴

Federal Unemployment Tax

FUTA has its own trigger. Pay $1,000 or more in cash wages to all household workers combined in any calendar quarter of 2025 or 2026, and you owe FUTA on the first $7,000 of each employee’s wages that year.³ The gross rate is 6.0%, but paying your state unemployment tax on time earns a credit of up to 5.4%, leaving an effective federal rate of 0.6%, or a maximum of $42 per worker per year.⁷

FUTA is entirely the employer’s expense. Never deduct it from the worker’s pay. If your state is designated a credit reduction state, meaning it borrowed from the federal unemployment fund and hasn’t repaid, your credit shrinks and the effective rate rises.⁸

Federal Income Tax Withholding Is Optional

You are not required to withhold federal income tax from a household employee’s pay. If the employee asks you to and you agree, you can.⁴ The employee gives you a Form W-4 with their filing status, and you use that to calculate the amount to withhold each pay period.⁹

For the employee, agreeing to withholding usually beats the alternative. Without it, they owe the full income tax at filing time and may face underpayment penalties if the bill is large.

Paperwork To Have In Place

Before you pay or report anything, get a few items together.

An Employer Identification Number (EIN). The IRS online application issues one immediately; you can also apply by mail or fax using Form SS-4.¹⁰¹¹
Form I-9, which every employer must complete within three business days of the new hire’s first day, after examining the worker’s original identity and work-authorization documents.¹²
The employee’s Social Security number, needed to report wages correctly. Credits earned through household employment count toward the worker’s future Social Security benefits.
A Form W-4 from the employee, only if you both agree to voluntary income tax withholding.¹³

Keep detailed pay records all year: dates, amounts, and any non-cash items provided. The IRS requires you to keep employment tax records at least four years after the tax is due or paid, whichever is later.¹⁴

How To File: Schedule H and W-2

Household employment taxes are reported once a year on Schedule H, which you attach to your Form 1040.¹⁵ The schedule calculates your Social Security, Medicare, and FUTA totals for the year. Most household employers don’t file quarterly.

You also need to give each employee a Form W-2 by January 31 of the following year, showing total wages and any taxes withheld. Copies of the W-2, with a transmittal Form W-3, go to the Social Security Administration. For 2026 wages, the SSA deadline is February 1, 2027, because January 31 lands on a weekend.³

W-2 penalties climb the longer you wait. For returns due in 2026, the fine is $60 per form if filed within 30 days of the deadline, $130 if filed by August 1, and $340 if filed after that or not at all. Intentional disregard carries a $680-per-form penalty.¹⁶

Paying Through the Year

Because you settle up at tax time rather than quarterly, the bill can sting in April if you haven’t planned. Two ways to smooth it out.

The simpler option: if you or your spouse have a W-2 job elsewhere, submit a new Form W-4 to that employer asking for extra federal income tax withholding. The additional amount withheld offsets your household tax liability when you file. No separate payments to track.

The other option is quarterly estimated tax payments using Form 1040-ES, due in April, June, September, and January.¹⁷ Either method helps you avoid the underpayment penalty that hits when too little tax was paid during the year.¹⁸

State Taxes and Wage Rules Sit On Top

Federal taxes are not the whole obligation. Most states require household employers to register for state unemployment insurance and pay into the state fund; wage bases and rates vary widely by state. Many states also require workers’ compensation insurance for household workers, with thresholds that differ by state, and a handful add disability insurance or paid family leave contributions. Check your state’s labor or workforce agency.

Separately, the Fair Labor Standards Act reaches most household employees. You must pay at least the federal minimum wage of $7.25 per hour, or your state’s higher minimum if one applies, and overtime rules cover most household workers. Live-in workers may be exempt from overtime under specific conditions.¹⁹

What Happens If You Skip It

Late deposits carry a tiered penalty: 2% if you’re one to five days late, 5% at six to fifteen days, 10% after fifteen days, and 15% if the tax is still unpaid ten days after the IRS sends a demand notice.²⁰ Interest runs on both the tax and the penalty.

Failing to complete Form I-9 for your worker carries separate civil fines assessed per violation by immigration authorities, with the amount tied to the size of the operation, the seriousness of the violation, and any prior violations.²¹ The underlying taxes are often modest, a few thousand dollars a year for a typical family. The penalties for skipping them can quickly exceed that.

1
Internal Revenue Service. Employee (Common-Law Employee)
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Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
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Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
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Social Security Administration. Employment Coverage Thresholds
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Social Security Administration. Contribution and Benefit Base
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U.S. Department of Labor. Unemployment Insurance Tax Topic
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Internal Revenue Service. FUTA Credit Reduction
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Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate
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Internal Revenue Service. Get an Employer Identification Number
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Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
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U.S. Department of Labor. I-9 Central
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Internal Revenue Service. Form W-4, Employee’s Withholding Certificate
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Internal Revenue Service. How Long Should I Keep Records?
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Internal Revenue Service. About Schedule H (Form 1040), Household Employment Taxes
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Internal Revenue Service. Information Return Penalties
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Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals
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Internal Revenue Service. Form 1040-ES, Estimated Tax for Individuals
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U.S. Department of Labor. Fact Sheet 79B, Live-in Domestic Service Workers Under the FLSA
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Internal Revenue Service. Failure to Deposit Penalty
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USCIS. Penalties for Prohibited Practices