A household employee is anyone you hire to work in or around your home where you control what work is done and how. If you pay them $2,700+ in 2026, you owe employment taxes (FICA, FUTA) reported on Schedule H.
- Nannies, housekeepers, caregivers, and private cooks are almost always household employees
- The IRS “control test” determines classification — not how you pay them
- Misclassifying as a 1099 contractor can trigger penalties up to 100% of taxes owed
IRS Definition of a Household Employee
According to IRS Publication 926, a household employee is a worker you hire to do domestic work in a private home. The defining factor is control: if you determine not only what work gets done but also how and when it gets done, that worker is your employee.
It does not matter whether the work is full-time or part-time, or whether you found the worker through an agency or a personal referral. The location and the control test are what matter.
Ask yourself two questions:
1. What work is done? You decide the tasks (cleaning, childcare, cooking, yard work).
2. How is the work done? You set the schedule, provide supplies, and direct the methods.
If you answer “yes” to both, the worker is your household employee — even if you give them day-to-day freedom in carrying out those tasks.
This definition comes from the common-law rules the IRS uses across all employment settings. For household work specifically, Publication 926 is the authoritative reference.
Household Employee vs Independent Contractor
The distinction determines whether you owe employment taxes. Getting this classification wrong can lead to IRS penalties, back taxes, and interest.
| Factor | Household Employee (W-2) | Independent Contractor (1099) |
|---|---|---|
| Who controls the work? | You set the schedule, tasks, and methods | Worker controls how and when they work |
| Who provides tools? | You provide equipment and supplies | Worker brings their own tools |
| Works for others? | Primarily works for your household | Serves multiple clients independently |
| Payment structure | Hourly, weekly, or salary | Per-job or project-based fee |
| Can be fired? | You can let them go at any time | Bound by terms of a contract |
| Tax form | W-2 | 1099-NEC |
| Your tax obligation | Withhold FICA, pay FUTA, file Schedule H | No withholding, no employer taxes |
“Most people who work in your home on a regular basis are employees, not contractors. Your nanny, housekeeper, and in-home caregiver almost always qualify as household employees.
Common Types of Household Employees
The IRS considers a wide range of domestic workers to be household employees. If you hire any of the following people and control how they do their work, they are your employees:
Casual babysitters — typically teenagers you hire occasionally — may be exempt if they are under 18 and babysitting is not their principal occupation. However, if you pay any single worker $2,700+ in 2026, taxes apply regardless of age.
Who Is NOT a Household Employee
Not everyone who does work in your home is your employee. The IRS excludes several categories:
- Self-employed contractors — A plumber, electrician, or repair technician who operates their own business and controls how they complete the job.
- Agency-employed workers — If the agency controls the worker's assignments, pay, and methods, the agency is the employer.
- Your spouse — Wages paid for household work are not subject to FICA or FUTA.
- Your child under 21 — Their wages are exempt from FICA taxes.
- Your parent (with exceptions) — Generally exempt from FICA unless specific conditions apply.
Even if a cleaning company sends the same person to your house every week, if the company controls that worker's schedule and pay, the company is the employer. But if you hire that same person privately and direct their work, they become your household employee.
Tax Obligations for Household Employers
Once you cross the wage threshold, you take on several tax responsibilities reported on Schedule H (Form 1040), filed with your personal income tax return.
| Tax | Employer Pays | Withheld from Employee |
|---|---|---|
| Social Security | 6.2% (up to $176,100) | 6.2% (up to $176,100) |
| Medicare | 1.45% (no cap) | 1.45% (no cap) |
| FUTA | 0.6% (first $7,000) | N/A |
| Federal Income Tax | N/A | Optional (per W-4) |
| State Income Tax | Varies | Required in most states |
| State Unemployment | Varies by state | N/A |
The $2,700 Threshold for 2026
The household employee tax threshold is the amount you must pay a single worker before employment taxes kick in. For 2026, that threshold is $2,700.
| Tax Year | FICA Threshold | Change |
|---|---|---|
| 2026 | $2,700 | +$100 |
| 2025 | $2,600 | +$100 |
| 2024 | $2,500 | -$100 |
| 2023 | $2,600 | +$100 |
You pay your housekeeper $300 per week. By week 9 (around early March), you will have paid $2,700. At that point, FICA taxes are owed on every dollar you have paid — and will pay — for the rest of the year.
How to Set Up as a Household Employer
Setting up correctly from day one saves you from headaches at tax time.
Get an EIN
Verify Work Eligibility
Collect Tax Forms
Register with Your State
Set Up Payroll
State-Specific Requirements
Federal rules apply everywhere, but each state layers on its own requirements:
Frequently Asked Questions
Do I need to pay taxes if I pay my babysitter in cash?
Yes. If you pay a single household worker $2,700 or more in cash wages during 2026, you owe employment taxes regardless of payment method.
What happens if I don't pay household employee taxes?
The IRS can assess the full employer and employee shares of FICA plus a penalty of up to 100% of the tax due. Repeated or willful failure can lead to criminal charges.
Can I hire my nanny as a 1099 contractor to avoid taxes?
No. A nanny who works in your home on a schedule you set is almost always a household employee under IRS rules. Misclassification can result in back taxes, penalties, and interest.
Do I need to provide a W-2?
Yes. You must provide a W-2 by January 31 of the following year and file Copy A with the Social Security Administration.
What is Schedule H and when do I file it?
Schedule H is the IRS form household employers use to report employment taxes. Attach it to your Form 1040 and file by April 15.
PAYHROLL Team
Payroll Experts
Every article is researched and reviewed by our editorial team with expertise in IRS compliance, household employment law, and small business payroll. We fact-check against IRS publications and update content when tax rules change.
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