Household Employee Tax Basics

If you hire someone to work in your home, you may have what’s called a household employee. Many people don’t realize this makes them an employer in the eyes of the IRS. That means you may be responsible for certain tax obligations, often referred to as the “nanny tax.”

Home » Household Employee Tax Basics

June 10, 2025

Who Counts as a Household Employee?

A household employee is someone you control and direct—not just the results of their work, but how they do their job. If you hire a person through an agency and the agency controls the work, the person may not be your employee. But if you hire someone directly and manage their schedule, provide supplies, and supervise their tasks, that person is likely your employee.

Examples include:

Nannies and babysitters
Housekeepers and maids
Private nurses or caregivers
Gardeners and landscapers (if not part of a business)

Independent contractors, like plumbers or electricians with their own business, are not considered household employees.

Your Tax Responsibilities

If you pay a household employee $2,800 or more in cash wages in 2025, you’re required to:

Withhold and pay Social Security and Medicare taxes (FICA)
Pay any applicable state unemployment taxes

If you paid more than $1,000 in wages in any calendar quarter, you need to pay federal unemployment tax (FUTA). Additionally, you do not need to withhold federal income tax unless your employee asks you to and you agree to do so. You may also need to pay state employment taxes and register with your state’s labor department.

The Nanny Tax Breakdown

Social Security and Medicare (FICA) Taxes

Both the employer and employee pay 7.65% each, for a total of 15.3%.
You may choose to pay the employee’s share yourself instead of withholding it from their pay.

Federal Unemployment Tax (FUTA)

Only the employer pays FUTA tax.
The standard rate is 6%, but it may be reduced to 0.6% if you qualify for a federal tax credit.
FUTA tax only applies to the first $7,000 of wages per employee, per year.

Filing Requirements

As a household employer, you’re responsible for:

Obtaining an Employer Identification Number (EIN)
Filing Schedule H with your personal income tax return (Form 1040) if you choose to pay for the employment taxes for your household employee
Form 941, Employer’s Quarterly Federal Tax Return
Issuing a W-2 to your employee by January 31
Filing the W-2 and W-3 with the Social Security Administration

Are There Any Exceptions?

Yes. You don’t need to pay or withhold Social Security and Medicare taxes from wages if your household worker is

Under age 18, and this is not their primary job,
Your spouse,
Your child under age 21, or
A parent (with some exceptions)

Also, you don’t need to pay FUTA taxes on wages for a household worker who is:

Your spouse,
Your child under age 21, or
Your parent

What Happens If You Don’t Comply?

Failing to withhold and pay the appropriate taxes can lead to:

IRS penalties and interest
Loss of potential Social Security and Medicare benefits for your employee
Delays or issues when applying for benefits like unemployment

Thus, it’s vital to meet all tax obligations related to household employees.

Final Tip: Keep It Professional

Even if your nanny or housekeeper feels “like family,” it’s important to handle your role as a household employer seriously. Set up a formal payroll process, track hours, and follow tax rules. You can use payroll services designed for household employment to make things easier. If you have questions about the tax implications of household employees, please contact our office.

References

Topic no. 756, employment taxes for household employees. Internal Revenue Service. https://www.irs.gov/taxtopics/tc756