Hiring Help at Home? Key Tax Rules to Know

If you bring someone into your home to perform regular or occasional services, the IRS may consider them a household employee. When this applies, you may be responsible for Social Security, Medicare, and unemployment taxes, along with specific reporting requirements.

Who is considered a household employee?

A household employee is someone whose work you direct, meaning you determine what tasks they perform and how those tasks should be completed, and who depends on the tools or supplies you provide. Common examples include:

• Nannies
• Babysitters
• Housekeepers or cleaners
• Gardeners
• Other in-home workers who follow your instructions

For instance, if someone visits several mornings a week to care for your child or help with chores using your supplies, they typically count as your employee, even if the arrangement feels informal.

Not everyone who works for you qualifies. You usually do not owe employment taxes when the worker:

• Operates a business of their own
• Uses their own equipment and serves multiple clients
• Is a repair specialist or other independent contractor

You also do not owe household employment taxes for:

• Your spouse
• Your child under age 21
• Your parent (with limited exceptions)
• Anyone under age 18 unless household work is their main occupation

If classification is unclear, a CPA can help determine the correct status.

Tax requirements for 2025

If you pay a household employee $2,800 or more in cash wages in 2025, you must handle Social Security and Medicare taxes (FICA) totaling 15.3% of their wages.

This includes 7.65% attributed to the employee and 7.65% paid by you as the employer.
You are also responsible for FUTA taxes, which are 6% on the first $7,000 of wages per employee. Wages above this amount are not subject to FUTA. Your state may also require additional unemployment taxes.

An additional 0.9% Medicare tax applies once an employee’s wages exceed $200,000.
Federal income tax withholding is optional unless your employee requests it and you agree.

What qualifies as wages?

Cash wages include payments made by check, money order, digital payment apps, gift cards, and other cash-equivalent methods. They do not include the value of meals, lodging, clothing, or transit passes unless you give cash instead, in which case that cash becomes taxable wages.

Noncash compensation is generally exempt from Social Security and Medicare taxes but may still be subject to federal income tax unless specifically excluded.

Filing requirements

If you pay wages subject to FICA or FUTA, or if you withhold federal income tax, you must file Schedule H (Household Employment Taxes) along with your Form 1040.
Given how detailed the rules can be and the risk of penalties, many households rely on a CPA or a payroll service to ensure compliance, especially when managing multiple employees.

Employment eligibility

When you hire someone to work regularly in your home, both you and the employee must complete USCIS Form I-9, Employment Eligibility Verification. The employee must present acceptable documents to verify identity and authorization to work. Keep the completed form in your records for potential government review.

Understanding and following household employment tax rules can help you avoid issues later. With the support of a CPA or payroll service, you can meet your obligations with confidence.