A household employee is anyone you hire to do work in or around your home when you control both what gets done and how it gets done. That control test, drawn from IRS common-law rules, is what separates a household employee from an independent contractor, and the classification carries real consequences: once you pay a household employee $3,000 or more in cash wages during 2026, you owe Social Security and Medicare taxes on those wages and pick up a set of federal reporting duties that catch many home employers by surprise.
The Control Test
The IRS asks whether you have the right to direct not just the result of the work but the methods used to reach it. If you can dictate how the job is done, the worker is your employee, even if in practice you let them get on with it.
Several signals feed into that judgment. Telling the worker when, where, and how to do tasks points to employment. Supplying the tools, cleaning products, or equipment does too. A steady, ongoing arrangement where the worker relies on you for regular income, rather than serving many clients, leans the same way. No single factor decides it, but together they usually make the picture clear.
Who Typically Qualifies
The IRS lists nannies, babysitters, housekeepers, cleaning people, caretakers, health aides, private nurses, drivers, and yard workers among the roles that commonly fit.
A nanny is the classic example. You set the hours, decide how the children spend their day, and shape meals and discipline. A housekeeper whose schedule and priorities you set falls into the same category. Even a yard worker who comes on a regular schedule, uses your mower, and follows your instructions on what to trim or plant is your household employee.
Household Employee or Independent Contractor?
An independent contractor controls their own methods. They usually run a business, advertise to the public, bring their own tools, set their own schedule, and get paid by the job. A plumber who fixes your sink or a landscaping company that arrives with its own crew are contractors. You’re buying a finished result, not directing how it happens.
Job titles don’t settle the question. A “gardener” might be either. Someone from a landscaping business who brings equipment, hires helpers, and works their own way is a contractor. An individual who shows up every Tuesday, uses your tools, and follows your instructions is your employee.
Workers Placed Through Agencies
Hiring through a staffing or placement agency doesn’t automatically make the agency the employer. If the agency just refers the worker and you control the work, the worker is yours. The agency is the employer only when it keeps control over the methods and directs the tasks.
When the Classification Isn’t Clear
If the answer is genuinely uncertain, either you or the worker can file Form SS-8 and ask the IRS to make a formal determination. The process takes at least six months. File your tax return on time anyway, and pay any taxes that may be due; don’t wait for the ruling.
When Tax Obligations Actually Start
Someone can be your household employee without triggering any federal tax duties. The obligations turn on specific dollar thresholds.
Social Security and Medicare
Pay a household employee $3,000 or more in cash wages during 2026, and those wages are subject to Social Security and Medicare taxes. The combined rate is 15.3%, split evenly at 7.65% for you and 7.65% for the worker. You withhold the employee’s share from their pay and match it with your own. Stay under $3,000 for the year with that employee, and none of the wages are subject to these taxes.
One exception: wages paid to a household worker under age 18 are exempt from Social Security and Medicare taxes unless household work is that person’s principal occupation.
Federal Unemployment Tax
FUTA kicks in if you pay total cash wages of $1,000 or more in any calendar quarter to household employees. The rate is 6% on the first $7,000 of each worker’s wages, though a credit for state unemployment taxes usually brings the effective rate to 0.6%. FUTA comes entirely out of your pocket; you never withhold it from the worker.
Federal Income Tax Withholding
You aren’t required to withhold federal income tax from a household employee’s pay. You should withhold only if the employee asks and you agree. If you do, the employee completes a Form W-4, and either of you can end the arrangement in writing at any time.
Family Members Are Treated Differently
Hiring a relative changes the tax picture. Even above $3,000, wages paid to certain family members are exempt from Social Security, Medicare, and FUTA taxes:
- Your spouse.
- Your child under 21.
- Your parent, in most situations.
The parent exemption has a notable exception. If your parent cares for your child who is either under 18 or has a condition requiring adult supervision for at least four continuous weeks in the quarter, and you are divorced, widowed, or living with a spouse who is physically or mentally unable to provide that care, you owe Social Security and Medicare taxes on your parent’s wages.
These family exemptions only cover employment taxes. Income tax withholding rules still apply to a spouse, child, or parent if you’ve agreed to withhold.
What You Owe and File Once the Thresholds Apply
Crossing the thresholds brings a handful of specific obligations. Skipping any of them is where household employers most often stumble.
Get an EIN
You need an Employer Identification Number to file household employment tax forms. It’s a nine-digit number the IRS issues, separate from your Social Security number. If you already have one from a business or a previous household employee, use it. Otherwise, apply online at IRS.gov/EIN and receive one immediately.
File Schedule H With Your 1040
Household employment taxes go on Schedule H, attached to your personal Form 1040. There’s no separate employer return. Schedule H covers Social Security, Medicare, FUTA, and any withheld federal income tax in one place. Because these amounts aren’t in your regular paycheck withholding, you may face an estimated tax penalty unless you either increase the withholding from your own paycheck or pension or make quarterly estimated payments to cover what you’ll owe.
Issue a W-2 by February 1, 2027
You must give your household employee a Form W-2 showing 2026 wages and taxes withheld, and file Copy A with the Social Security Administration, by February 1, 2027. You’ll also file a Form W-3 to transmit the W-2, even if you have only one employee. If employment ends earlier, you can hand over the W-2 sooner, but the filing deadline doesn’t change.
Report the New Hire
Federal law requires employers to report new and rehired employees to the state new hire directory, generally within 20 days of the hire date. Some states set shorter deadlines. This applies to household employers the same as to businesses.
Wage and Hour Rules Apply Too
Household employees are covered by the Fair Labor Standards Act. You must pay at least the federal minimum wage of $7.25 per hour for all hours worked. Many states set a higher minimum, and you owe whichever rate is greater.
Overtime turns on whether the worker lives in your home. A day worker who tops 40 hours in a week is entitled to time-and-a-half for the extra hours. Live-in domestic workers are exempt from the federal overtime requirement, but the live-in exemption only waives overtime; it never reduces the minimum wage.
The Cost of Misclassifying
The most expensive mistake is treating a household employee as an independent contractor. Misclassification can trigger back taxes, penalties, and interest reaching back years.
Filing Schedule H late brings a penalty of 5% of the unpaid tax for each month the return is late, capped at 25%. If the return is more than 60 days late, the minimum penalty is the lesser of $525 or 100% of the tax owed. Failing to pay adds another 0.5% per month, also capped at 25%, and interest compounds daily at the federal short-term rate plus 3%.
Beyond the IRS, misclassification can mean back wages for minimum wage and overtime violations under the FLSA. States pile on their own consequences: unpaid unemployment insurance premiums, and in some states workers’ compensation liability. Most states also charge their own unemployment insurance tax on household employers, with quarterly wage thresholds that vary, and a handful require disability insurance or workers’ compensation coverage once certain hours are worked. Your state labor or employment agency is the place to confirm what applies where you live.