IRS Publication 926: Household Employer Taxes and Filings

IRS Publication 926, the Household Employer’s Tax Guide, sets out the federal tax rules that apply when you hire someone to work in or around your home. 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, and you may also owe federal unemployment tax. The publication covers nannies, senior caregivers, housekeepers, private chefs, and any other domestic worker whose day-to-day work you direct. What follows is the practical version: who is covered, what triggers the taxes, how to set yourself up, what to pay, and how to file.

Who the Rules Apply To

A household employee is someone who works in or around your home and whose work you control. You set the schedule, provide the supplies, and decide what gets done and how. A housekeeper who follows your cleaning routine on your days is an employee. A landscaper who arrives with their own crew and equipment to deliver a finished result is an independent contractor.¹

Getting this wrong is expensive. If you pay someone as an independent contractor when they should have been classified as an employee, you become liable for the employment taxes you should have paid all along, plus penalties and interest.¹

The 2026 Wage Thresholds That Trigger Tax

Two separate dollar thresholds decide which federal employment taxes you owe. They work differently, and crossing one does not automatically mean you’ve crossed the other.

The $3,000 FICA Threshold

Pay any single household employee $3,000 or more in cash wages during 2026 and you owe Social Security and Medicare taxes on all of that employee’s wages for the year. The threshold is evaluated per employee.² Once you cross it, the tax reaches back to the first dollar you paid.

One exception matters: you do not owe FICA on wages paid to a household employee under 18 unless household work is that person’s principal occupation. A high schooler who babysits on weekends is typically exempt even if annual pay tops $3,000.³

The $1,000 Quarterly FUTA Threshold

Federal unemployment tax uses a different test. If total cash wages you paid to all household employees combined reached $1,000 or more in any calendar quarter of 2025 or 2026, you owe FUTA on wages paid during 2026.² The look-back to the prior year is easy to miss. FUTA applies to the first $7,000 of wages per employee and is paid entirely by you.

What Counts as Cash Wages

Both thresholds count only cash wages: check, money order, direct deposit, or actual cash. Food, lodging, clothing, transit passes, and other noncash items do not count. If you give cash in place of any of those things, that cash does count.²

What to Set Up Before the First Paycheck

Three pieces of paperwork come before any tax calculation.

Employer Identification Number

You need an EIN to file employment tax returns and issue W-2s. The IRS online application, open Monday through Friday from 7 a.m. to 10 p.m. Eastern, issues the number immediately.⁴ You can also apply by mailing or faxing Form SS-4.⁵

Form I-9

Federal law requires you to verify your new employee’s authorization to work in the United States on Form I-9. The employee completes their section and presents identity and work-authorization documents for you to examine. Verification must be finished within three business days of the first day of work, or on the first day if the job is shorter than that.⁶ Form I-9 is not required for workers hired for casual domestic work on a sporadic, irregular, or intermittent basis.⁷ An occasional babysitter may fall under that exception; a regularly scheduled nanny does not.

Form W-4

Have the employee complete Form W-4.⁸ Household employment is different from a regular job on one point: withholding federal income tax is optional. You only withhold if the employee asks you to on the W-4. Even when it isn’t required, agreeing to withhold saves the employee from a large April bill. Both the I-9 and W-4 stay in your files; neither is sent to the IRS.

The Taxes You Actually Owe

Once you cross the thresholds, three categories of federal tax are in play.

Social Security and Medicare

The combined FICA rate is 15.3% of cash wages, split evenly: 7.65% from you and 7.65% from the employee. Your half breaks down as 6.2% Social Security and 1.45% Medicare, and the employee’s half mirrors that.⁹ You withhold the employee’s share from each paycheck and remit the full 15.3% to the IRS. You can choose to pay the employee’s share yourself, but that extra amount becomes taxable wages to the employee.

The Social Security portion applies only to wages up to $184,500 in 2026. Above that cap, only the 1.45% Medicare tax continues, and Medicare has no ceiling.¹⁰ An Additional Medicare Tax of 0.9% applies once you pay any single employee more than $200,000 in a calendar year. That surcharge falls entirely on the employee, and you must begin withholding it at that point regardless of filing status.¹¹

Federal Unemployment Tax

FUTA sits entirely on the employer side. The gross rate is 6.0% on the first $7,000 in cash wages paid to each employee during the year.¹² Paying your state unemployment taxes on time and in full earns a credit of up to 5.4%, bringing the effective federal rate down to 0.6%, or a maximum of $42 per employee per year. Never withhold FUTA from the employee’s pay.

Federal Income Tax Withholding

If your employee requested withholding on the W-4, calculate it using the current IRS withholding tables and remit whatever you withhold along with the FICA amounts. If they did not request it, you owe nothing here.

How to Pay Through the Year

Household employers generally do not deposit these taxes through the business deposit system. Instead, you fold the liability into your own personal income tax payments. There are two practical routes:

Increase your quarterly estimated tax payments on Form 1040-ES. For 2026, the payments are due April 15, June 16, September 15, and January 15, 2027.¹³
File a new W-4 with your own employer to have additional income tax withheld from your paycheck, sized to cover the household employment tax you’ll owe at year-end.

Either route avoids an underpayment penalty on your 1040. If the household tax is small, some employers simply pay the full amount with their return, which works when the amount is too small to trigger a penalty.

Year-End Filings

Two forms close the year: a W-2 for your employee and Schedule H attached to your own return.

Form W-2 and W-3

Give your employee a Form W-2 showing total wages, Social Security and Medicare amounts, and any federal income tax withheld. The employee’s copy is due by January 31 after the tax year. Copy A goes to the Social Security Administration with Form W-3. For the 2026 tax year, the SSA deadline is February 1, 2027, because January 31 falls on a Saturday.¹⁴ Noncash benefits you provided still appear on the W-2 (unless a specific exclusion applies) but not in the Social Security or Medicare wage boxes.

Schedule H

Schedule H is where the whole year gets reconciled. It is not a standalone return; you attach it to your Form 1040.¹⁵ The form walks through both halves of FICA, your FUTA, and any income tax you withheld. The total flows into the Other Taxes section of your 1040. Estimated payments and any extra withholding you set up during the year get credited against it, and you settle the difference. Schedule H is due with your 1040, typically April 15. Failing to file draws a penalty of 5% of the unpaid tax for each month or partial month the return is late.¹⁶

State Obligations Publication 926 Does Not Cover

Publication 926 is federal. The IRS itself directs household employers to contact their state unemployment agency for state rules.² Three areas usually apply:

State unemployment insurance (SUTA). Most states require household employers to pay in, though thresholds and taxable wage bases differ. The wage base ranges from around $7,000 to over $50,000 depending on the state.
State income tax withholding. In states with an income tax, you may need to withhold from your employee’s wages. Some states mirror the federal optional-withholding rule for household employers; others require it.
Workers’ compensation insurance. Many states require coverage once a domestic worker crosses a set number of hours or a wage threshold. Some states require it from the first hour; others exempt part-time household staff. Check with your state’s workers’ compensation board.

Tax Benefits That Offset the Cost

Child and Dependent Care Credit

Paying a household employee to care for a child under 13 or a dependent who can’t care for themselves can qualify you for the Child and Dependent Care Tax Credit. The credit is based on up to $3,000 of qualifying expenses for one dependent or $6,000 for two or more.¹⁷ Both spouses on a joint return must have earned income, and the credit is generally unavailable to married taxpayers filing separately. The care provider can’t 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. Report the provider’s name, address, and taxpayer identification number, and use Form 2441 to calculate the credit.

Dependent Care FSA

If your own employer offers a Dependent Care FSA, nanny wages and babysitting costs are eligible expenses you can pay with pre-tax dollars. Any dependent care benefits excluded from your income reduce the expenses you can use for the Child and Dependent Care Credit, so the same dollars can’t be counted twice.

Recordkeeping

Keep employment tax records for at least four years after the return is filed for the year the taxes are due.¹⁸ That means pay stubs, your W-2 copies, Schedule H worksheets, and the calculations behind them. A simple payroll log listing pay date, gross wages, amounts withheld, and net pay is enough.

Form I-9 has a different clock. Keep it for three years from the hire date or one year after employment ends, whichever is later.¹⁹ For a long-tenured nanny, that means the entire period of employment plus one additional year. Store these records securely; they contain Social Security numbers and other sensitive information.

1
Internal Revenue Service. Worker Classification 101: Employee or Independent Contractor
2
Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
3
Internal Revenue Service. Instructions for Schedule H (2025)
4
Internal Revenue Service. Topic No. 756, Employment Taxes for Household Employees
5
Internal Revenue Service. About Form SS-4, Application for Employer Identification Number
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U.S. Citizenship and Immigration Services. Instructions for Form I-9, Employment Eligibility Verification
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U.S. Citizenship and Immigration Services. Handbook for Employers M-274 – 2.0 Who Must Complete Form I-9
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Internal Revenue Service. Topic No. 753, Form W-4, Employees Withholding Certificate
9
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
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Social Security Administration. Contribution and Benefit Base
11
Internal Revenue Service. Topic No. 560, Additional Medicare Tax
12
Internal Revenue Service. Topic No. 759, Form 940 – FUTA Tax Return Filing and Deposit Requirements
13
Internal Revenue Service. Publication 509 (2026), Tax Calendars
14
Internal Revenue Service. Publication 926 – Household Employer’s Tax Guide
15
Internal Revenue Service. About Schedule H (Form 1040) – Household Employment Taxes
16
Internal Revenue Service. Failure to File Penalty
17
Internal Revenue Service. Topic No. 602, Child and Dependent Care Credit
18
Internal Revenue Service. Employment Tax Recordkeeping
19
U.S. Citizenship and Immigration Services. Retention and Storage