If you pay someone to work in your home, you may be their employer in the eyes of the IRS. The rules are manageable once you know the thresholds.
Licensing, permit, lien and tax rules vary by state and city and change over time. This guide is general information, not legal or tax advice; check with your local building department, state licensing board or a professional for your situation.
Checklist
- Someone you control and pay for work in your home is usually your household employee, not an independent contractor.
- In 2026, Social Security and Medicare taxes apply once you pay one household employee $3,000 or more in cash wages.
- Federal unemployment tax applies if you pay $1,000 or more in total cash wages in any calendar quarter.
- You report household employment taxes on Schedule H with your Form 1040 and give your employee a W-2.
Families who hire a nanny, housekeeper, caregiver or gardener are often surprised to learn they can be employers. The IRS calls these “household employees,” and Publication 926 explains the rules. Here are the essentials.
Employee or contractor?
A worker is usually your household employee if you control not only what work is done but how it’s done. A nanny who follows your schedule and house rules is typically an employee. A cleaning company that sends its own staff, or a self-employed worker who offers services to the public and controls how the work is done, typically isn’t.
The 2026 thresholds
| Tax | When it applies in 2026 |
|---|---|
| Social Security and Medicare | You pay one household employee cash wages of $3,000 or more in the year |
| Federal unemployment tax (FUTA) | You pay total cash wages of $1,000 or more in any calendar quarter, to all household employees combined |
Once the Social Security and Medicare threshold is met, the taxes apply to all of that employee’s cash wages. You and your employee each pay 6.2% for Social Security and 1.45% for Medicare. The thresholds can change each year, so check the IRS for the current amounts.
Wages paid to your spouse, your child under 21 or your parent are generally exempt from these taxes, as are wages paid to workers under 18 unless household work is their main occupation.
Tip
Some families pay the employee’s share of Social Security and Medicare themselves instead of withholding it. That’s allowed, but the amount you pay counts as additional wages for income tax purposes.
The paperwork
- Get an employer identification number (EIN) from the IRS. You can’t use your Social Security number on these forms.
- Check the worker’s eligibility to work in the U.S. using Form I-9.
- File Schedule H with your Form 1040 to report and pay household employment taxes. To avoid an underpayment penalty, you may need to increase your own withholding or make estimated payments during the year.
- Give your employee a Form W-2 by the deadline, and file it with the Social Security Administration.
State rules
Many states have their own requirements, such as state unemployment insurance, minimum wage, overtime and paid leave rules. Check with your state’s labor and tax agencies.
Why it matters
Paying household employees on the books protects them, giving them Social Security credits and unemployment coverage, and protects you from back taxes and penalties later.
Hiring other help for your home? See hiring movers for an interstate move and how to hire a contractor without regrets.
Homeowners ask
Is a cleaning service from an agency my employee?
Usually not. If the agency controls the work and pays the worker, the worker is generally the agency’s employee. Workers in business for themselves who set their own methods may be independent contractors.
Are payments to family members covered?
Wages paid to your spouse, your child under 21 or your parent are generally exempt from Social Security and Medicare taxes, with some exceptions.
Do I have to withhold income tax?
No, federal income tax withholding isn’t required for household employees. You can withhold if your employee asks and you agree.