Household Employee Payroll
Reviewed for 2026 ·
Short answer
If you pay a nanny, housekeeper or in-home caregiver cash wages of $3,000 or more in 2026, the IRS treats you as their employer: you must withhold 6.2% for Social Security and 1.45% for Medicare from their pay and match both. Pay any household employee $1,000 or more in a calendar quarter and federal unemployment tax also applies, at 6% of the first $7,000 of cash wages. You report all of it on Schedule H with your own tax return, and issue the worker a W-2.
Employee or contractor?
This is the question that decides everything else, and families get it wrong in the same direction almost every time. The IRS test is control: if you set the hours, direct how the work is done, and provide the equipment, the worker is your employee — regardless of how you both prefer to describe it.
A nanny working in your home to your schedule is an employee. So, usually, is a regular housekeeper or an in-home carer. A self-employed contractor is someone running their own business, setting their own methods, and typically serving several clients.
Getting it wrong is not a paperwork problem. Misclassifying an employee as a contractor shifts your share of payroll tax onto them, and it surfaces when they file, apply for unemployment, or are injured.
The thresholds that trigger each obligation
Read from IRS Topic 756 on 2026-08-25. These figures are indexed and do change from year to year — confirm the current ones before relying on them.
| Trigger | Threshold | What it means |
|---|---|---|
| Social Security and Medicare | $3,000+ cash wages to one employee in 2026 | Withhold 6.2% + 1.45%, and match both as employer |
| Federal unemployment (FUTA) | $1,000+ in any calendar quarter | 6% on the first $7,000 of cash wages; employer pays, not withheld |
| Additional Medicare | Over $200,000 in wages | Extra 0.9% withheld from the employee only |
| Federal income tax | Only if both parties agree | Not required for household employees, but common and simpler at year end |
State unemployment insurance and state income tax rules are separate and often start at lower thresholds. Registering with your state is usually the step families miss.
What you have to do
In roughly this order. None of it is difficult; it is simply unfamiliar, because most people have never been an employer.
- Get an EIN
- A federal Employer Identification Number, free from the IRS. You cannot file a W-2 without one, and you should not use your Social Security number in its place.
- Verify eligibility to work
- Complete Form I-9 with the employee within the first few days. Keep it; do not file it.
- Withhold and track each pay period
- FICA from every payment once you expect to cross the threshold, and keep a record per pay period of gross, each deduction, and net.
- Give the employee a pay stub
- Most states require an itemised statement each pay period, and household employers are not exempt. It is also what your nanny needs to rent a flat or get a loan.
- Pay estimated tax during the year
- Schedule H is filed with your annual return, but the liability accrues as you pay wages. Paying quarterly estimates avoids an underpayment penalty in April.
- Issue a W-2 by 31 January
- To the employee, with a W-3 to the Social Security Administration. This is the deadline families most often miss.
- File Schedule H
- Attached to your own Form 1040. It reconciles what you withheld and owe for the year.
Paying in cash with no record is the arrangement to avoid, however convenient it feels for both sides. It leaves your employee with no earnings history, no unemployment cover and no way to prove income to a landlord — and it leaves you personally liable for the unpaid tax, with penalties, when it surfaces.
Common questions
Is my nanny an employee or a contractor?
Almost always an employee. The IRS test is control: if you set the hours, direct how the work is done and provide the equipment, the worker is your employee. A nanny working in your home to your schedule meets that test regardless of what either party would prefer.
What is the nanny tax threshold for 2026?
$3,000 in cash wages to any one household employee triggers Social Security and Medicare withholding, per IRS Topic 756. Separately, $1,000 in any calendar quarter triggers federal unemployment tax. Both figures are indexed and change between years.
Do I have to give a nanny a pay stub?
In most states, yes — the requirement for an itemised statement each pay period applies to household employers too. It is also the document your employee will need for a rental application or a loan, since they have no HR department to ask.
Do I need an EIN to pay a household employee?
Yes. It is free from the IRS and you cannot file the W-2 without one. Do not substitute your Social Security number.
The pay stub your employee needs
Household employers have no payroll department, but the same obligation to give an itemised statement each pay period. Our generator produces one from the gross, withholding and net you enter.
Open the pay stub generator