Quick Answer
Household employers must withhold Social Security and Medicare taxes (15.3% total) if they pay any household employee $2,700+ in 2026. They don't have to withhold income taxes but must pay federal and state unemployment taxes, file Schedule H with their tax return, and provide W-2s. The "nanny tax" threshold triggers at $2,700 annually per employee.
Best Answer
Sarah Chen, Payroll Tax Analyst
Families who employ nannies, housekeepers, or other domestic workers and need to understand their employer tax obligations
When household employer rules apply
You become a household employer subject to "nanny tax" rules if you pay any household employee $2,700 or more in 2026. This includes nannies, housekeepers, gardeners, private nurses, or drivers who work in or around your home.
Threshold calculation example:
Required tax withholding and payments
Social Security and Medicare taxes (FICA):
Federal income tax withholding:
Federal unemployment tax (FUTA):
Real-world example: Full-time nanny
The Johnson family pays their nanny $20/hour for 40 hours/week:
The family's actual cost is $3,424 more than the nanny's gross wages due to employer taxes.
State-specific requirements
Most states require additional obligations:
State unemployment insurance (SUI):
Workers' compensation:
State disability insurance:
Filing and reporting requirements
Schedule H (Form 1040):
Form W-2:
Form W-3:
Payment timing and quarterly estimates
You have two options for paying household employment taxes:
Option 1: Pay annually
Option 2: Pay quarterly
Common mistakes to avoid
Treating employees as independent contractors:
Forgetting state requirements:
Cash payments without records:
What families should do
1. Calculate if you meet the $2,700 threshold before hiring
2. Get an Employer Identification Number (EIN) from the IRS
3. Verify employee eligibility using Form I-9
4. Set up payroll records to track wages, taxes, and payments
5. Research your state's requirements for unemployment, disability, and workers' comp
6. Consider payroll software or professional service for complex situations
Key takeaway: Household employers paying $2,700+ annually must withhold and pay 15.3% FICA taxes, file Schedule H with their tax return, provide W-2s, and usually pay state unemployment taxes. The total employer cost is typically 8-12% more than the employee's gross wages.
Key Takeaway: Household employers must pay 15.3% FICA taxes on wages over $2,700 annually, plus federal unemployment (0.6%) and state requirements, making their total cost 8-12% above the employee's gross wages.
Tax obligations for household employers vs. household employees
| Tax Type | Employer Responsibility | Employee Responsibility | Threshold/Rate |
|---|---|---|---|
| Social Security | Pay 6.2% + withhold 6.2% | Pay 6.2% via withholding | $2,700+ annual wages |
| Medicare | Pay 1.45% + withhold 1.45% | Pay 1.45% via withholding | $2,700+ annual wages |
| Federal Income | Optional withholding | Request withholding or pay quarterly | If requested by employee |
| Federal Unemployment | Pay 0.6% of first $7,000 | No responsibility | $1,000+ quarterly wages |
| State Unemployment | Pay rate varies by state | No responsibility | Varies by state |
More Perspectives
Sarah Chen, Payroll Tax Analyst
Regular employees who are considering household work or want to understand how their household worker situation differs from regular employment
How household employment differs from regular jobs
If you work as a nanny or housekeeper, your paycheck situation is quite different from a typical W-2 job:
Tax withholding differences:
This means larger tax bills: If your household employer isn't withholding income taxes, you'll likely owe money when filing your tax return or need to make quarterly estimated payments.
Example comparison:
Regular job earning $35,000:
Household job earning $35,000 (no income tax withholding):
What to do as a household employee
1. Ask your employer to withhold income taxes if you'll owe more than $1,000
2. Make quarterly estimated tax payments if income tax isn't withheld
3. Keep records of all wages and taxes paid
4. Understand you may not qualify for unemployment benefits in all states
Key Takeaway: Household employees often have no income tax withheld from paychecks, creating larger tax bills at filing time unless they request withholding or make quarterly payments.
Sarah Chen, Payroll Tax Analyst
Domestic workers, caregivers, or others working in household employment who need to understand their rights and tax obligations
Rights and protections for household workers
Household employees have specific legal protections that vary by state:
Federal protections:
State variations:
Workers' compensation coverage:
Tax planning for household workers
Multiple employer situations:
If you work for several families, each paying under $2,700:
Cash payment tracking:
Deduction opportunities:
When employers don't comply
If your household employer isn't following tax rules:
Key Takeaway: Household workers have varying legal protections by state and must often handle their own tax planning, especially when working for multiple families or receiving cash payments.
Sources
- IRS Publication 926 — Household Employer's Tax Guide
- IRS Schedule H Instructions — Household Employment Taxes filing requirements
Reviewed by Sarah Chen, Payroll Tax Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.